What is a Pell Grant? How This Affects Student Loan Forgiveness | Economic news

New York (AP) — President Joe Biden’s student loan forgiveness program announced Wednesday aims to provide $10,000 in student debt forgiveness to millions of Americans.

But for federal Pell Grant recipients, that amount is even higher: $20,000.

So what is a Pell Grant? And why is there a special benefit for people who have one?

Created by the Higher Education Act in 1965 to promote access to education, the Federal Pell Scholarships are special scholarships reserved for undergraduates and certain other students with the greatest financial need. Grants generally do not need to be repaid, but they often do not cover the full cost of college. Beneficiaries therefore take out additional loans.

The Biden administration is targeting Pell grant recipients for additional forgiveness “to ease the transition to repayment and help those borrowers most at risk of default or default once payments resume,” according to the Ministry of Finance. Education.

About 27 million Pell Grant recipients will now be eligible for loan forgiveness. But for some, the $20,000 will make little difference.

Lynn Hunt, a data analyst in Portland, Oregon, is a Pell Fellowship recipient who borrowed between $45,000 and $50,000 to attend the University of Wisconsin and repaid about $15,000 but still owes $70,000 due interests.

“I know (Biden) mentioned, you know, $20,000 for Pell Grants, but people who had Pell Grants had to take out the most loans, Hunt said. “So $20,000 doesn’t help most of these people substantially. . And what happens every time we get one of these half measures is that the box is sent back for another decade .

For Yaneth Peña, however, the money will make the difference. Peña graduated from North Carolina State University in 2014. She got about $4,000 in grants and about $25,000 in federal loans. Under Biden’s discount plan, his debt would be reduced to $5,000.

Relieved of the financial burden, Peña said she could now seriously pursue higher education – something she said she had been hesitant to consider in the past due to her loans.

“It could really change everything,” Peña said.

Pell grant recipients generally have a harder time repaying their debt, notes the Department of Education. In the 2020-2021 academic year, approximately 30% of all students enrolled in undergraduate programs in the United States received Pell scholarships, and nearly all recipients came from families that earned less than $60,000. per year.

Almost all Pell grant recipients are independent students or dependent students from the bottom half of the income distribution, according to an Urban Institute report on college affordability.

Through this program, low-income Americans can currently receive up to $6,895 per year for about six years.

If you are unsure if you have received a Federal Pell Scholarship, review all financial aid award letters administered by the Office of Federal Student Aid.

Associated Press reporters Gillian Flaccus in Portland, Oregon, Claire Savage in Chicago and Arleigh Rodgers in Indianapolis contributed to this report. Savage and Rodgers are members of the Associated Press/Report for America Statehouse News Initiative corps. Report for America is a nonprofit national service program that places reporters in local newsrooms to report on underreported issues.

The Associated Press receives support from the Charles Schwab Foundation for educational and explanatory reports aimed at improving financial literacy. The independent foundation is separate from Charles Schwab and Co. Inc. The AP is solely responsible for its journalism.

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