President Joe Biden on Wednesday announced detailed plans to fulfill a campaign promise to provide millions of Americans with $10,000 in student debt relief — and up to $10,000 more for those in the greatest financial need — along with measures to reduce the burden of paying off their debts. the remaining federal student debt.
Biden announced that borrowers who earn less than $125,000 a year, or families earning less than $250,000, will be eligible for a $10,000 loan forgiveness. For those who also receive Pell grants, which are designed for students with the most significant financial needs, the federal government cancels up to $10,000 in additional federal loan debt.
“Both of these targeted actions are for the families that need it most: the working and middle class have been particularly hard hit during the pandemic,” Biden said in a speech at the White House on Wednesday afternoon.
Biden is also extending the pause in all payments on federal student loans for what he called the “deadline” until the end of 2022.
If his plan survives the legal challenges that are almost certain to occur, it could be a windfall for many ahead of this fall’s midterm elections. According to federal data, more than 43 million people have federal student debt, with an average balance of $37,667. Almost a third of borrowers owe less than $10,000, and about half owe less than $20,000. According to White House estimates, Biden’s statement will write off the federal student debt of approximately 20 million people.
“That’s 20 million people who can start living their lives,” Biden said. “All this means that people can finally start crawling out from under this mountain of debt. To get on top of their rent and utilities. To finally think about buying a house, starting a family or starting a business.”
Supporters say the repeal will narrow the racial wealth gap — black students are more likely to take out federal student loans and for higher amounts than others. According to a Brookings Institution study, four years after receiving a bachelor’s degree, black borrowers owe on average almost $25,000 more than their white peers.
Biden has faced pressure from liberals demanding broader relief for hard-hit borrowers, as well as from Republicans questioning the fairness of any widespread forgiveness.
The White House stressed that none of the richest 5% of people will see a loan relief.
But leading Republicans were not convinced.
Senate Republican leader Mitch McConnell said: “President Biden’s inflation is crushing working families, and his answer is to give even more public money to the elite with higher salaries. Democrats are literally using the money of working Americans to try to buy themselves some enthusiasm from their political base.”
In fact, many Democrats, from Congressional leaders to those facing difficult re-elections this November, have pushed the administration to maximize debt relief, in part seeing it as an exciting issue, especially for black and young voters.
The extension of the moratorium on payments in the era of the pandemic comes just days before millions of Americans are due to find out when their next student loan bills will arrive. The current pause should end on August 31.
The administration said that in the coming weeks, the Department of Education will publish information so that borrowers can sign up for debt cancellation. Cancellation for some will be automatic if the department has access to information about their income, but others will need to fill out a form.