President Joe Biden (Photo by Scott Eisen/Getty Images)
This 1 thing would cut student debt in half.
Here’s what you need to know.
According to a new report, Congress can cut half of all student loan debt by doubling Pell Grants. Currently, Democrats in Congress propose to increase Pell Grants and make community college free under the latest reconciliation bill. The Gender Equity Policy Institute found that by doubling Pell Grants:
Student loan borrowers would cut their student loan debt by half or more;
Community college students who receive the maximum Pell Grant award will graduate student loan debt-free.
Student loan borrowers with a Bachelor’s degree who get the maximum Pell Grant award will experience a 79% reduction in student debt.
Pell Grants are need-based grants to students to help pay for higher education at 2-year and 4-year colleges and universities. Currently, the maximum annual Pell Grant is $6,495. Approximately 95% of Pell Grant recipients have a family income below $60,000. Over the past 50 years, more than 196 million Pell Grants have been awarded to students, with nearly 4 in 10 undergraduates receiving one.
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Here’s who benefits if Congress doubles Pell Grants to $13,000:
More than 25 million adults each year could benefit from increasing the Pell Grant;
1 in 4 adults under the age of 40 are eligible for a Pell Grant;
Of the 25.2 million people eligible, there are 11.7 million who have college credit but no degree;
53% of women eligible for a Pell Grant are women of color; and
1.9 million Dreamers and people eligible for DACA would be included in the Pell Grant program for the first time under the Pell Grant Preservation & Expansion Act of 2021.
A survey with YouGov found that more than 50% of people would go back to college if Pell Grants were doubled. Biden is focused on helping student loan borrowers, particularly with student loan forgiveness. (Here are 17 ways Biden can fix student loan forgiveness). While Biden doesn’t believe he has the legal authority to cancel everyone’s student loans, Biden has cancelled nearly $10 billion of student loans on a targeted basis. (Find out if you qualify for this Biden student loan forgiveness). As Biden evaluates options to improve student loan repayment and student loan forgiveness, doubling Pell Grants could be atop the agenda.
The most immediate effect of doubling Pell Grants to $13,000 is that student loan borrowers wouldn’t need to borrow as much student loan debt. This could save a generation of student loan borrowers from delaying other important life milestones like getting married, starting a family, buying a home or saving for retirement due to significant student loan debt. Sen. Elizabeth Warren (D-MA) and Senate Majority Leader Chuck Schumer (D-NY) also say that cancelling student loan debt would stimulate the economy. Doubling Pell Grants also would create a financial pathway for more people to access higher education, particularly for individuals with lower income, who could generate higher earnings after graduation. Unlike wide-scale student loan cancellation, Pell Grants are an existing federal program. (Here’s where Democrats stand on student loan cancellation). The only question is whether Congress would increase funding for Pell Grants. This is potentially more achievable in Congress than passing legislation for student loan cancellation, which is less popular among members of Congress. Pell Grants are also well-targeted to students with the most financial need. By increasing access to higher education and reducing the need for student loans, doubling Pell Grants could improve racial and gender equity. Finally, 2.9 million single parents automatically qualify for the maximum Pell Grant, plus a $1,500 supplement, which means they could access $14,500 annually under a doubled Pell Grant program.
Expect Congress and the U.S. Department of Education to make several changes to your student loans. Doubling Pell Grants and making community college free could only be the start. Since wide-scale student loan cancellation is less likely, however, it’s important that you understand all options for your student loans. Here are some popular ways to save money: