WASHINGTON – President Joe Biden said Wednesday he will cancel at least $10,000 in student loan debt for millions of borrowers, giving long-sought relief to Americans saddled by payments and taking a major gamble to energize young voters ahead of the midterm elections.
Biden announced his long-awaited decision in a speech from the White House’s Roosevelt Room, delivering on a campaign promise yet falling short of demands from progressive Democrats who wanted even more debt forgiven.
Biden, who made the move using executive authority, said it’s become out of reach for many Americans to go to college.
“That ticket has become too expensive for too many Americans,” he said. “The burden is so heavy that even if you graduate, you might not have the ticket that graduating college once offered.”
Here’s what we know:
- How much will be forgiven? Up to $20,000 in debt relief for around 7 million low-income Pell Grant recipients; $10,000 for all other borrowers with incomes less than $125,000 and from households earning $250,000 or less.
- How many borrowers will be affected? Up to 43 million borrowers are set to receive some form of relief. Roughly 20 million will have their balances canceled entirely.
- Inflation watch: Corporate America has a mixed reaction to the president’s plan. Some economists have said forgiveness could spark inflation and put pressure on the value of the dollar — a concern the White House has dismissed.
For months, Biden held off making a final decision amid pressure from fellow Democrats, unions and other liberal groups pushing him to cancel at least $50,000 in student loan debt. His move to target $10,000 as a baseline won mostly praise from the left but also pushback from activists seeking more.
The president also opened the door for attacks from Republicans, who slammed the debt cancelation plan as an elitist ploy to help the rich and punish hard-working Americans who paid off their student loan debts.
Biden to fight to double Pell Grant, says relief is about ‘possibilities’
Biden said he is going to continue to fight to double the Pell Grant. “I didn’t get that done this time,” he said.
He added that his announcement on relief is “about opportunities.”
“It’s about giving people a fair shot,” he said. “It’s about the one word America can be defined by, possibilities. It’s all about providing possibilities.”
– Rebecca Morin
Income-based loan repayment
Biden introduced a plan for paying back loans based on discretionary, or disposable, income.
Instead of paying 10% of discretionary income to repay one’s student loan, people with student loans will pay 5%. Biden clarified that the percentage is based on income after necessities like housing and food are paid.
“It’s a game changer,” he said.
– Ella Lee
Biden said debt relief is ‘economically responsible’
Biden said the relief to some student loan borrowers is “an economically responsible course.”
“As we provide targeted relief, we’re taking an economically responsible course,” Biden said, pushing back on concerns of how the relief will impact inflation.
“Independent experts agree that these actions taken together will provide real benefits for families without meaningful effect on inflation,” Biden said.
– Rebecca Morin
Biden: ‘It’s time for the payments to resume.’
Outlining the White House’s plan to forgive student loan debt, Biden said the moratorium on student loan payments will be extended one last time to Dec. 31.
“We’ve wound down pandemic relief programs like the ones, unemployment insurance and small businesses. It’s time we do the same thing for student loans,” said Biden. “It’s time for the payments to resume.”
– Kenneth Tran
‘Three key factors’ to Biden’s student loan response
Biden on Wednesday announced three key factors that make up his student loan relief plan: an extension on the student loan moratorium to Dec. 31, the cancellation of $20,000 in debt for Pell Grant recipients and $10,000 for other borrowers and “fixing the student loan system itself.”
“All this means people can finally crawl out from under that mountain of debt, to get on top of their rent and utilities, to finally think about buying a home or starting a family or starting a business” Biden said. “When this happens, the whole economy is better off.”
– Ella Lee
Canceling debt is a ‘Band-Aid;’ advocates want college to be more affordable
Some education advocates are saying they want to see more from the Biden administration to address future student loan debt.
While the National Parents Union, an education policy advocacy group, praised the Biden administration for taking steps to cancel student loan debt, “there is still much work to be done.”
“Canceling $10,000 in student loan debt merely puts a Band-Aid on the real problem of reforming the system that has landed us in this mess — and within years we will be right back at the same point,” they said.
The group noted that the average debt is $12,000 for a borrower who is white. However, Black women on average have more than $52,000 in debt.
“While this will take some of the immediate burden away from many families, addressing those inequitable conditions, including the lack of generational wealth and additional support resources that many are forced to make up for through additional borrowing, we have not seen enough to address the underlying inequity of these systems that perpetuate economic inequality,” the group said.
The group said they want to see lawmakers make college more affordable and accessible.
Braxton Brewington, spokesperson for the Debt Collective, a group that has organized demonstrations calling for total student loan debt cancellation, said today’s action was a first step worth celebrating but it fell “short of what economic and racial justice demands.”
“The even better news is that Biden’s authority to cancel student debt doesn’t disappear after one executive use — he can and should simply cancel more student debt, which would boost the economy, narrow the racial wealth gap and grant real financial freedom to communities across the country for whom $20,000 or $10,000 of cancelation offers little relief,” Braxton said.”
– Rebecca Morin and Chris Quintana
What did borrowers do during the freeze?:Paid off debt, built a house, kept food on the table
White House dismisses inflation risk with student debt cancelation
The White House is pushing back at concerns from economists that President Joe Biden’s student debt cancellation plan could exacerbate inflation.
Democratic economists including former Treasury Secretary Larry Summers have argued the billions more collectively in Americans’ pockets they won’t have to repay the government could increase demand and further accelerate 40-year-high inflation.
But a senior administration official, who briefed reporters on the plans, said the restart of debt payments to the government — after an extended moratorium ends Dec. 31 — and additional targeted savings for low-income Pell Grant recipients will “largely offset” each other.
“The joint impact of those two actions could well be neutral or deflationary,” the official, who spoke on the condition of anonymity, said.
Mark Zandi, chief economist at Moody’s Analytics, shared a similar outlook.
“With the President’s plan on student lending coming into relief, it is clearer that the impact on growth and inflation in 2023 will be marginal,” Zandi said in a tweet. “Ending the moratorium will weigh on growth and inflation, while debt forgiveness will support them. The net is largely a wash.”
– Joey Garrison
A tough decision:How soaring inflation is complicating Biden’s decision whether to forgive student loan debt
Pell Grants at 50: Loss of buying power has Congress rethinking ways of paying for college
Who will be affected?
According to the Education Department, about 90% of those receiving relief, and who aren’t in school, make less than $75,000 a year.
Among eligible borrowers, 21% are 25 or younger and nearly half are between the ages of 26 and 39. More than a third are over 40, including 5% of whom are senior citizens.
– Chris Quintana
Market and corporate America eye Biden plan with caution, as inflation specter looms
Corporations and the wider market have had mixed reactions to Biden’s student loan forgiveness plan. Backers of the move see it as a smart way to give consumers more money to buy homes and goods. Other market watchers are concerned that investors would see negative stock portfolios if the economy shrinks in response to wiped out loan debt.
If forgiveness sparks more inflation, it could also pressure the value of the dollar. The Brookings Institution has calculated that a $10,000 reprieve would add up to a wipeout of debt larger than many social safety nets combined, including WIC, SNAP and federal school lunch plans.
– Riley Gutiérrez McDermid
Future payments for lower- and middle-income borrowers could be cut in half
The Education Department is proposing to halve the monthly payments for some borrowers from 10% to 5% of discretionary income — the amount that borrowers have to pay each month on their undergraduate loans. The proposal also would raise the amount of income considered “nondiscretionary” — which means it’s protected from being used for repaying loans.
For some types of loan repayment plans, balances would be forgiven after 10 years of payment instead of 20. And, the rule would fully cover the borrower’s unpaid monthly interest, so a borrower’s loan balance wouldn’t grow if they are making required payments.
The department said the proposal will be published in the near future in the Federal Register and open for comments for 30 days.
– Nirvi Shah
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.
House Minority Leader Kevin McCarthy called Biden’s plan a “debt transfer scam,” charging that Americans who have already paid their debts will be forced to foot the bill for the forgiven loans.
Senate Minority Leader Mitch McConnell described the move as a “slap in the face” to Americans who chose not to go to college or already paid their debt.
“This is the one consistent thread that connects Democrats’ policies: Taking money and purchasing power away from working families and redistributing it to their favored friends.”
Senator John Barrasso of Wyoming, 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 and Ella Lee
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 he 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.
