President Joe Biden on Wednesday announced his long-awaited plan to fulfill his campaign promise to provide $10,000 in debt relief for millions of Americans and up to $10,000 more for those most in need of money.
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, Biden said in a tweet. For recipients of Pell grants, which are intended for students with the most significant financial needs, the federal government cancels up to $10,000 in additional federal loan debt.
In keeping with my campaign promise, my Administration is announcing a plan to give working and middle class families breathing room as they prepare to resume federal student loan payments in January 2023.
I'll have more details this afternoon. pic.twitter.com/kuZNqoMe4I
— President Biden (@POTUS) August 24, 2022
Biden is also extending the pause in the payment of federal student loans for what he called the “last term” until the end of 2022. He was scheduled to speak Wednesday afternoon at the White House to present his proposal to the public.
If his plan survives the legal challenges that are almost certain to occur, it could be a windfall for parts of the country ahead of midterm elections this fall. 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.
Supporters say the repeal will reduce 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.
However, this action is unlikely to stir up any of the factions that have been fighting for influence, as Biden weighs how much to cancel and for whom.
Biden has faced pressure from liberals demanding broader relief for hard-hit borrowers, as well as from moderates and Republicans questioning the fairness of any widespread forgiveness. The delay in Biden’s decision has only increased the expectation of what his own aides admit is a political stalemate. The people spoke on condition of anonymity to discuss Biden’s alleged statement in advance.
The continued payment freeze in the era of the coronavirus pandemic comes just days before millions of Americans were due to find out when their next student loan bills were due. This is the closest time that the administration has come to the end of the extension of the payment freeze, while the current pause should end on August 31.
Details of the plan are being closely guarded while Biden weighs his options. The administration said Wednesday that the Department of Education will release information in the coming weeks for borrowers eligible to sign up for debt relief. 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.
Current students will be eligible for assistance only if their loans are issued before July 1, 2022. Biden also intends to propose limiting the amount that borrowers pay monthly on student loans to 5% of their earnings.
During the 2020 presidential campaign, Biden was initially skeptical about writing off student loan debt as he faced more progressive candidates for the Democratic nomination. Senators Elizabeth Warren, d-Mass., and Bernie Sanders, d-Island, have proposed canceling reservations worth $50,000 or more.
In an attempt to gain the support of young voters and prepare for a general election battle against President Donald Trump, Biden unveiled his initial proposal to write off the debt of $10,000 per borrower without mentioning the income ceiling.
Biden has narrowed his campaign promise in recent months by adopting an income cap as soaring inflation has caused political damage, and as he sought to prevent political attacks, repealing would benefit those with higher wages. But Democrats, from members of the Congressional leadership 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 this fall.
Democrats are betting that Biden, whose public approval has plummeted over the past year, can help motivate young voters to participate in the elections with his announcement.
Although Biden’s plan has changed from the one he originally proposed during the campaign, “he will get a lot of credit for doing what he was committed to,” said Selinda Lake, a Democratic pollster who worked with Biden during the 2020 election.
A survey of 18-29-year—olds conducted by the Harvard Institute of Politics in March showed that 59% of respondents are in favor of debt cancellation in one form or another — whether for all borrowers or the most needy – although student loans do not rank high among the issues that most concern people in this age group.