DAVID GURA, HOST:
President Joe Biden made some big news last week.
(SOUNDBITE OF ARCHIVED RECORDING)
PRESIDENT JOE BIDEN: Using the authority Congress granted the Department of Education, we will forgive $10,000 in outstanding federal student loans. In addition, students who come from low-income families, which allowed them to qualify to receive a Pell Grant, will have their debt reduced $20,000.
GURA: The announcement is reverberating across the political landscape, but also, of course, in the lives of some of the 40 million Americans who hold federal student loan debt. To find out how, we reached out to a couple of those borrowers.
LANIECE MCCALLA: I did the good math. And my debt will be done because I've been paying on this for, like, a hundred years, you know what I mean?
GURA: Laniece McCalla of New York didn't actually finish cosmetology school, but she still owed about $13,000. She says the loan relief is a game changer.
MCCALLA: I can even plan for a house. It just is opening my eyes to possibilities now. Whereas before, it was just almost like, when is that hammer going to drop? My daughter, she wanted to do softball this year. Whereas before, I really couldn't because that's extra. You got to buy cleats. You know, so it's enabling me to live - you know? - not just to survive, but to live.
GURA: But the news hit Ann McWilliams of rural Montana very differently.
ANN MCWILLIAMS: That is just not enough to even budge the needle on mine. Even with the additional - you know, I think it's going to be up to 20,000 because I'd taken out Pell Grants in the past. So, you know, that still leaves me at over a hundred thousand in debt.
GURA: McWilliams has multiple degrees. She's a former addict who went through a period of being unhoused. She now works as an addiction counselor and believes education is key to changing her circumstances. To that end, she thinks Biden's plan doesn't go far enough.
MCWILLIAMS: If those student loans disappeared, that barrier would disappear. And I could participate in this American dream of homeownership and have something to hand off to my children. And maybe - you know, maybe my family would break this generational poverty. And, you know, we deserve it. We deserve to feel stable.
GURA: Both borrowers expressed concern over how the process to get relief will work or won't. Again, here's Ann McWilliams.
MCWILLIAMS: I guess I, at this point, don't have a lot of faith that whatever is put into place will actually roll out without a whole lot of muss and fuss. I'm like, this is just one more thing that I'm going to have to figure out how to navigate through and probably screw up on some technicality and thus won't benefit somehow.
GURA: For her part, Laniece McCalla also worries there is no real change in the system for future borrowers, especially when she considers how she got her loans.
MCCALLA: I feel that I was misled. I feel that I didn't even know the questions to ask. And unfortunately, at that time, my parents didn't understand either. So they were like, OK, that sounds good. And, you know, when you're 18, you know everything. So I'm like, yeah, I'll just sign here, here, here and here. And then stuff started happening and life happened. And I said, what the heck?
GURA: That was Laniece McCalla, along with Ann McWilliams, both of whom have federal loans. Many people around the country have more questions than answers after the announcement last week. Sequoia Carrillo from NPR's Education Desk joins us now. Hey, Sequoia.
SEQUOIA CARRILLO, BYLINE: Hi.
GURA: So we just heard Laniece say how she felt misled when she took out her loans and that she's worried for borrowers in the future. Does this plan apply to future borrowers? If a student were to take out a loan this week, would that be eligible for forgiveness under this plan?
CARRILLO: So the short answer is no. In order to be considered for forgiveness under this plan, student loans had to have been taken out before June 30, 2022. And the reason for this is that this plan seems to not really be designed to help current students or soon-to-be students. Current students are eligible based on their parent or guardian's income for forgiveness under this plan. But that was not really the goal of this plan.
GURA: That feels kind of arbitrary, right? Sure, it's a drop in the bucket, but it's a drop in the bucket that's happening now, not in a few years when other students would benefit. Is that fair?
CARRILLO: The administration is really framing this plan as a lifeline for borrowers who've been stuck under these loans for a very long time, almost like a one-time reset to the system. So that's why you see Pell Grant recipients qualifying for double the forgiveness of their non-Pell borrower peers. They're trying to give targeted relief to the lowest-income borrowers. But the point still stands - like, what makes these loans that a student takes out now versus next year versus last year any different? It is a little bit arbitrary.
GURA: Is there anything in this plan that could help future borrowers, maybe ones who won't get relief from this forgiveness?
CARRILLO: In talking with experts over the past few days, the one thing that they see in this plan that has the most potential to really shake up the education space is the changes to the income-driven repayment plans. So IDR plans are designed to help people who can't afford to make regular, large monthly payments to still keep up with their loans with the eventual promise of loan forgiveness after many years. Right now, it's after about 20 years.
The changes under this plan cut everything for an IDR plan in half. This means a loan servicer is looking at a borrower's income, looking at their discretionary funds, and they're saying, OK, pay 5% of a borrower's monthly income for undergraduate loans rather than the current 10%. And loan forgiveness will be available for borrowers with an initial loan balance of $12,000 or less in 10 years rather than the current 20. But with IDR plans, there's a big caveat, which is IDR has a very long and troubled history of not doing what it promises to do for borrowers. So we really have to wait and see how this shakes down.
GURA: Do we know when borrowers can expect to see this relief, or when they could enroll in a new type of IDR, or income-driven repayment plan?
CARRILLO: Yeah, we had news out of the White House on Friday, actually, that the application will launch in early October. So borrowers can go in and verify their income and see if they qualify for forgiveness. About 8 million people already have their income details on file with the Department of Education, but the rest will have to submit. And then once submitted, the application should be processed in about 4 to 6 weeks. So the administration is advising that people submit before November 15. That way, your application can be processed before the final extension to the payment pause runs out, which is at the end of the year.
GURA: That's NPR education reporter Sequoia Carrillo. Sequoia, thank you very much.
CARRILLO: Thank you. Transcript provided by NPR, Copyright NPR.
