Big Student Loan Forgiveness Plan Announced by Biden

WASHINGTON — President Joe Biden announced detailed plans on Wednesday to deliver on a campaign promise to provide $10,000 in student debt forgiveness for millions of Americans — and up to $10,000 more for those in greatest financial need — along with measures to ease the repayment burden on their students. remaining federal student debt.

Borrowers earning less than $125,000 a year, or families earning less than $250,000, are eligible for the $10,000 waiver, Biden announced. For those also receiving Pell Grants, which are reserved for students in the greatest financial need, the federal government would cancel up to an additional $10,000 in federal loan debt.

“Both targeted actions are aimed at families who need it most: Workers and middle classes are being hit particularly hard during the pandemic,” Biden said at the White House on Wednesday afternoon.

Biden is also extending a pause on all federal student loan payments for what he called the “last time” until the end of 2022.

If his plan survives the legal challenges that are almost certain to come, it could provide many a windfall ahead of this fall’s midterm elections. More than 43 million people have federal student debt, with an average balance of $37,667, according to federal data. Nearly a third of borrowers owe less than $10,000 and about half owe less than $20,000. The White House estimates that Biden’s announcement would eliminate the federal student debt of about 20 million people.

“That’s 20 million people who can get on with their lives,” Biden said. “All of this means that people can finally crawl under that 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.”

Proponents say cancellation will narrow the racial wealth gap — black students are more likely to borrow federal student loans and at higher amounts than others. Four years after earning their bachelor’s degree, black borrowers owe an average of nearly $25,000 more than their white peers, according to a Brookings Institution survey.

Biden has faced pressure from liberals to increase support for hard-hit borrowers, as well as from Republicans who have doubts about the fairness of widespread forgiveness.

The White House stressed that no one in the top 5% of income earners would see any loan relief.

But the top Republicans were not convinced.

Senate GOP leader Mitch McConnell said: “President Biden’s inflation is crushing working families, and his response is to give away even more government money to elites with higher salaries. Democrats are literally using working Americans’ money to try and get themselves some enthusiasm from their political base.”

In fact, many Democrats, from congressional leaders to others facing tough re-election bids in November, have pushed the government to push for debt relief as broadly as possible, partly as a stimulant issue, especially for black and young voters.

The pandemic-era payment freeze comes just days before millions of Americans will figure out when their next student loan bills are due. The current break runs until August 31.

The government said the Ministry of Education would release information in the coming weeks for eligible borrowers to apply for debt relief. Cancellation for some will be automatic, if the department has access to their income information, but others will have to fill out a form.

Current students are only eligible for an exemption if their loans were made before July 1, 2022. Biden also proposes limiting the amount borrowers must pay monthly for undergraduate loans to 5% of their earnings, down from 10% previously. The Department of Education will publish a proposed rule along those lines, which would also cover unpaid monthly interest for borrowers who keep track of their monthly payments — even if the payments are $0 because their income is low.

The Biden administration’s plan would also raise the income floor for repayments, meaning that no one earning below 225% of the federal poverty level would have to make monthly payments.

Biden’s plan builds on $32 billion in targeted student debt forgiveness issued by his administration for certain groups of borrowers. Much of it went to borrowers who say they were being ripped off by for-profit colleges.

The administration has also temporarily relaxed rules for Public Service Loan Forgiveness, a complex program that allows teachers, social workers and other officials to cancel student debt after 10 years of monthly payments.

“The positive effects of this move will be felt by families across the country, particularly in minority communities, and is the most effective action the president himself can take to help working families and the economy,” Senator Elizabeth Warren said on Wednesday. in a joint statement with Senate Leader Chuck Schumer.

Tweeted Rep. Pramila Jayapal, the chair of the House Progressive Caucus, said: “This will really relieve 43 million people and is a HUGE step in the right direction.”

The Department of Justice has issued a legal opinion concluding that the Higher Education Student Opportunity Exemption Act gives the Secretary of Education the “power to reduce the obligation to repay the principal balance of federal student loan debt.” or eliminate. The legal opinion also concluded that the write-off could be applied on a “class-wide” basis in response to the coronavirus pandemic.

Lawsuits are nevertheless likely.

During the 2020 presidential campaign, Biden was initially skeptical about canceling student loan debt as he faced more progressive candidates for the Democratic nomination. Sens. Warren, D-Mass., and Bernie Sanders, I-Vt., had suggested cancellations of $50,000 or more.

While trying to bolster support among younger voters and prepare for a general election campaign against President Donald Trump, Biden unveiled his original $10,000 debt forgiveness proposal per borrower, without mentioning an income cap.

Biden narrowed his campaign pledge in recent months by embracing the income cut as rising inflation took a political toll and as he wanted to avert political attacks that the cancellation would benefit those with higher home wages.

A survey of 18- to 29-year-olds conducted by the Harvard Institute of Politics in March found that 59% of those surveyed were in favor of some form of debt cancellation — whether it was for all borrowers or those who want it. need the most – although student loans were not ranked. high among the issues that most worried people in that age group.

Republicans reacted quickly to Biden’s decision on student debt relief on Wednesday, calling on the government to “sell out working families” to appease the party’s progressive wing.

“Today’s announcement is an affront to any American who has followed the rules and worked hard to responsibly pay off their own debt,” Senator John Barrasso, chairman of the Republican Senate Conference, said in a statement.

Biden’s lengthy deliberations have sparked grumbling among federal loan managers, who had been ordered to withhold statements of account while Biden considered a decision.

Industry groups had complained that the delayed decision gave them just days to notify borrowers, retrain customer service representatives and update websites and digital payment systems, said Scott Buchanan, executive director of the Student Loan Servicing Alliance.

It increases the risk that some borrowers will be accidentally told to pay, he said.

“At this late stage, I think that’s the risk we’re running,” he said. “You can’t just turn a dime with 35 million borrowers who all have different loan types and statuses.”

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AP writers Michael Balsamo and Farnoush Amiri contributed to this report.

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