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Where the Biden administration’s student debt relief plan will do the most good

August 26, 2022, 5:00 PM UTC

Happy Friday.

The Fortune team has done a bang-up job covering the Biden administration’s plan for student debt relief. While there are still some unknowns—like, when borrowers will see their balances shrink—there’s plenty to unpack right away.

  • The relief applies to most types of federal loans—federal undergraduate, graduate, Parent PLUS, and Pell Grants—but not private ones.
  • Borrowers who took out eligible loans before July 2022 qualify for forgiveness if they made under $125,000 in adjusted gross income (AGI) in the tax year 2020 or 2021.
  • Married joint tax filers must meet an AGI threshold of $250,000. And if you’re a dependent and your parents meet the threshold, you qualify.
  • Up to $10,000 in student debt will be canceled for eligible borrowers; $20,000 for eligible Pell Grant recipients.

You can find more of the details here. (Got questions? Please email my amazing colleague Alicia Adamczyk at alicia.adamczyk@fortune.com.)

Critics of debt forgiveness say that it doesn’t go far enough. Others have worried that it is an expensive intervention, using money that could be applied to other targeted policies that would better address the needs of poor or marginalized groups.

On the latter point, the income cap partly addresses those concerns, but another design element stands out.

There are roughly 27 million borrowers who earn under $125,000 a year and are also Pell Grant recipients. By virtue of their qualification for the grant money, we know a bit about them.

Pell Grants aim to help students from low-income families—some $50,000 a year, with more funds available for families earning $20,000 or less—and are traditionally more likely to go to Black, American Indian/Alaska Native, and Hispanic students, usually by wide margins. They make education possible all across the education ecosystem. This table shows the percentage of Pell Grant recipients in schools across the U.S. Schools serving poor and under-resourced communities may have a majority undergrad population of Pell Grant recipients, in many cases as high as 80%.

Conservative critics are taking to the social feeds, decrying the end of personal responsibility and complaining that high-income professionals with outstanding debt shouldn’t be bailed out on the government’s dime, which isn’t happening. (The White House evidently had time on its hands this week and took to social media to respond to critics by posting documentation of forgiven PPP loans held by Republicans.)

As the quiet impact of the financial relief is trickling in, one story at a time, it might be worth paying closer attention to the Pell grantees in your life—and in particular, the confluence of circumstances that made the grants necessary to begin with.

Wishing you a weekend full of unexpected relief.

Ellen McGirt
@ellmcgirt
Ellen.McGirt@fortune.com

This edition of raceAhead was edited by Jack Long.

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Parting words

“Student debt punishes poor and working-class people for pursuing higher education, ensnarling individuals and entire communities in compounding interest and fees. Today, student debt is a nearly $2 trillion weight, crushing 45 million people, with women, and especially Black women, disproportionately burdened. Student debt is a trap, and it is also a teacher. Debt teaches us that education is a commodity, that we need to choose degrees and careers based on pay, that we are alone in our financial struggles, that we don’t deserve to be free.”

—Former Ohio State Senator Nina Turner, Freedom Dreams: Black Women and the Student Debt Crisis, a documentary film by Astra Taylor

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