What's a Pell grant? How it affects student loan forgiveness

President Joe Biden’s student loan forgiveness program announced on Wednesday aims to provide $10,000 in student debt cancellation for millions of Americans

Student Loan Forgiveness Explainer (AP)

President Joe Biden's student loan forgiveness program announced on Wednesday aims to provide $10,000 in student debt cancellation for millions of Americans.

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

So what exactly is a Pell grant? And why is there a special benefit for people who got one?

Created by the Higher Education Act in 1965 as a way to promote access to education, federal Pell grants are special scholarships reserved for undergraduates and certain other students with the most significant financial need. The grants generally don't need to be paid back, but they often don't cover the full cost of college — so recipients take out additional loans.

The Biden administration is targeting Pell grant recipients for additional forgiveness “to smooth the transition back to repayment and help borrowers at highest risk of delinquencies or default once payments resume,” according to the Department of Education.

Roughly 27 million recipients of Pell grants will now be eligible for loan forgiveness.

Pell grant recipients typically experience more challenges repaying their debt, the department notes. In the academic year of 2020-21, around 30% of all students that enrolled in undergraduate programs in the United States were awarded Pell grants and nearly every recipient came from a family that made less than $60,000 a year.

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

Through the program, lower-income Americans can currently receive up to $6,895 annually for roughly six years.

If you're not sure if you received a federal Pell grant, review any financial aid award letters administered through Office of Federal Student Aid.

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