WASHINGTON – President Joe Biden announced Wednesday he will provide $20,000 in debt relief to Pell Grant recipients and $10,000 for all other borrowers.
Biden, who spelled out his plans in a tweet, is expected to provide more details at 2:15 p.m. EDT.
The long-anticipated move will be accompanied by an extension until January of the federal student loan payment pause.
Here’s what we know:
- How many Americans hold student loan debt? Roughly 43 million Americans hold federal student loan debt to the tune of $1.6 trillion, according to recent federal data. Biden’s move is expected to have an income cap of $125,000.
- Biden campaign promise: The action would fulfill a campaign promise. Advocates for widespread debt relief had grown impatient with the president’s inaction, and some had started to question if debt relief would materialize.
- Awaiting word: Biden will lay out more details in his remarks Wednesday afternoon.
What did borrowers do during the freeze?:Paid off debt, built a house, kept food on the table
Republicans attack Biden’s plan
Congressional Republicans attacked President Joe Biden’s decision to forgive up to $20,000 in student loans as a giveaway to the left wing of the Democratic party.
Senator John Barrasso, R-Wy., the chairman of the Senate Republican Conference, called the move “an insult to every American who played by the rules and worked hard to responsibly pay off their own debt.”
“Once again, the Biden administration is selling out working families to appease the far-left wing of the Democrat party,” Barrasso said in a statement.
The Republican National Committee said the decision will immediately increase inflation while costing taxpayers $300 billion.
– Maureen Groppe
Biden’s move praised by Democrats who had wanted more
Two top Democrats who had pushed for even more loan forgiveness than President Joe Biden is granting nonetheless praised his decision.
“With the flick of a pen, President Biden has taken a giant step forward in addressing the student debt crisis by cancelling significant amounts of student debt for millions of borrowers,” Senate Majority Leader Chuck Schumer, D-N.Y., and Sen. Elizabeth Warren, D-Mass., said in a joint statement.
The pair added, however, they will continue to push for more relief.
“Make no mistake, the work – our work – will continue as we pursue every available path to address the student debt crisis, help close the racial wealth gap for borrowers, and keep our economy growing,” they said.
Both had wanted at least $50,000 in loan forgiveness.
– Maureen Groppe
Education Department: Millions of borrowers’ student loans will be forgiven automatically
The Education Department said nearly 8 million borrowers are likely to get their loan forgiven automatically because the agency already has information about their income.
More details will be coming in the next few weeks.
Other borrowers will have to apply for loan forgiveness, and the applications will be available “no later” than when the freeze on student loan payments ends later this year.
– Chris Quintana
Biden to give details on student loan relief program at 2:15 p.m. EDT
President Joe Biden will deliver remarks further detailing his student loan relief plan at 2:15 p.m. ET.
In a tweet, Biden said he intends to cancel up to $20,000 of student loan debt for Pell Grant recipients and $10,000 for all other borrowers. The president is also extending a moratorium on loan payments until Dec. 31.
– Ella Lee
Biden to cancel $20,000 in student loan for Pell Grant recipients, $10,000 for other borrowers
President Joe Biden announced Wednesday a plan to cancel student loan debt will provide $20,000 in debt relief to Pell Grant recipients and $10,000 for all other borrowers.
“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,” the president wrote in a tweet.
The debt forgiveness will only be available to borrowers with incomes less than $125,000 and households earning $250,000 or less, according to an outline of the president’s plan. The president is also extending a moratorium on loan payments until Dec. 31.
Biden is also expected to cut monthly payments in half for undergraduate borrowers.
Pell Grants are awards geared toward low-income students to help them cover the costs of their college expenses. The award varies, but the max is currently set at $6,895 for the 2022-23 academic year. Pell Grants are often used by students of color.
The additional relief for Pell Grant recipients could be a popular inclusion for the NAACP, unions and other progressive groups that have pushed Biden to offer greater debt relief beyond $10,000, the figure Biden campaigned on.
– Joey Garrison, Chris Quintana and Rebecca Morin
An unprecedented move
The mass cancellation of student loans would be unprecedented in the nation’s history of student borrowing — but there has been little precedent in the student loan landscape for more than two and a half years.
At the onset of the coronavirus pandemic, then-President Donald Trump paused student loan payments, set interest rates at zero percent and stopped collection attempts on overdue debts. Both Trump and Biden extended the moratorium multiple times. The most recent extension was April 6, less than 30 days before payments had been scheduled to start in May. It was set to expire Aug. 31, with some borrowers getting notices that were later retracted about payments resuming Sep. 1.
One thing weighing on the administration is the effect of loan forgiveness on inflation. Democratic economist Larry Summers this week repeated his warnings that erasing student loan debt will make inflation worse.
AMERICANS ARE DIVIDED:On whether student loan forgiveness fair to those without college degrees.
The administration already has erased roughly $32 billion in student debt for 1.6 million borrowers by widening the eligibility requirements for pre-existing relief programs. It cleared the debt of those who attended predatory colleges and the permanently disabled. It also has canceled more than $10 billion in student debt for those working in the public sector.
Biden’s latest plans mean forgiving billions more in student loan debt for millions of borrowers, eclipsing the administration’s past actions. Yet millions of Americans will be left with student loan debt, especially those who pursued advanced degrees or had less financial support from their families or scholarships to pay for college.
What will forgiving student loans cost?
It’s not clear how far the plan will go or what it will cost. One analysis found that forgiving $10,000 per borrower would wipe $321 billion in student loan debt, and it would completely erase the debt for about a third of borrowers, or roughly 12 million people. Another this week found that forgiving federal college student loan debt will cost between $300 billion and $980 billion over 10 years, depending on exactly how the program is rolled out.
An analysis of student debt by Mark Kantrowitz, who has written several books about student financial aid, estimated that forgiving the debt of borrowers who owe $10,000 or less and make less than $125,000 annually would cost about $46 billion and cover 23.5% of borrowers.
Progressives led by Senate Majority Leader Chuck Schumer, Sen. Elizabeth Warren and Rep. Ayanna Pressley repeatedly called on the administration to cancel $50,000 in debt per borrower. But the top conservatives on education committees, Sen. Richard Burr and Rep. Virginia Foxx, have questioned the Education Department’s authority to freeze student loan payments and discharge debt.
