Delaware college using COVID-19 relief funds to forgive over $700K in student debt
DOVER, Del. - Delaware State University announced it will cancel up to $730,655 in student loan debt for recent graduates who have struggled financially during the COVID-19 pandemic.
On May 12, the university pledged to use funds it received from the $1.9 trillion COVID-19 relief plan to waive any debt eligible students may owe.
"Our students don’t just come here for a quality college experience. Most are trying to change the economic trajectory of their lives for themselves, their families, and their communities. Our responsibility is to do everything we can to put them on the path," Delaware State University President Tony Allen said.
FILE - A detail of an NYU student's 2021 graduation cap and tassel in Washington Square Park amid the COVID-19 pandemic on May 09, 2021 in New York City.
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More than 200 students are eligible for the aid, with the average student qualifying for about $3,200 in relief, Antonio Boyle, vice president for strategic enrollment management, said.
"Too many graduates across the country will leave their schools burdened by debt, making it difficult for them to rent an apartment, cover moving costs, or otherwise prepare for their new careers or graduate school. While we know our efforts won’t help with all of their obligations, we all felt it was essential to do our part," Boyle added.
Meanwhile, federal and some private student loan payments have been suspended and interest rates set at 0% through at least Sept. 30 by President Joe Biden, extending an order set by the previous administration.
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Since the extension, student loan debt in the United States has increased at double the rate of previous years to a collective $1.73 trillion as of the first quarter of 2021, according to NerdWallet.
But the potential for student loan forgiveness in the U.S. might become a reality in the future.
The tax break on college debt cancellations in the COVID-19 relief package signed in early March removed a potential roadblock to forgiving student loan debt: taxes.
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The provision won’t count any debt forgiven from Dec. 31, 2020, to Jan. 1, 2026, as income. Under one of the existing forgiveness programs (income-driven repayment), the amount forgiven is reported to the IRS as income and taxed according to the borrower’s current tax bracket.
The tax measure was adapted from the Student Loan Tax Relief Act spearheaded by Sens. Bob Menendez, D-N.J., and Elizabeth Warren, D-Mass. On March 6, Warren tweeted, "This clears the way for President Biden to #CancelStudentDebt without burdening student borrowers with thousands of dollars in unexpected taxes."
Experts say the tax relief measure could do just that.
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"Given the context and all the discussions about loan forgiveness, I think it’s likely that this is a nod from Congress to open up this door," says Megan Coval, vice president of policy and federal relations at National Association of Student Financial Aid Administrators.
The Associated Press contributed to this report.