WASHINGTON — President Joe Biden on Wednesday unveiled a plan to forgive as much as $20,000 of student loan debt for some Americans and to extend a pause on loan repayments prompted by the coronavirus pandemic.
The plan is aims to “provide more breathing room for people so they have less burden by student debt,” the president said. In comments from the White House, Biden stressed that the relief would go to “families who need it the most: working and middle class people.”
“Education is a ticket to a better life ... but over time that ticket has become too expensive for too many Americans,” Biden said. “All this means that an entire generation is now saddled with unsustainable debt in exchange for an attempt at least at a college degree. The burden is so heavy that even if you graduate you may not have access to the middle-class life that the college degree once provided.”
As part of the Biden-Harris Administration’s student debt relief plan, the U.S. Department of Education will cancel up to $20,000 worth of debt for Pell Grant recipients and $10,000 worth of debt for those who did not receive Pell Grants, officials said. Borrowers who make more than $125,000 individually or $250,000 as a household are not eligible for the debt cancellation, according to authorities.
Officials are also extending the pause on student loan repayment that was enacted as a response to the coronavirus pandemic until Dec. 31. The pause had been expected to end on Aug. 31.
Republicans slammed the announced plan, with Senate Minority Leader Mitch McConnell, R-Ky., calling it “socialism” and “a slap in the face to working Americans who sacrificed to pay their debt or made different career choices to avoid debt.”
“This policy is astonishingly unfair,” he said in a statement. “President Biden’s inflation is crushing working families, and his answer is to give away even more government money to elites with higher salaries.”
In a joint statement with Sen. Elizabeth Warren, D-Mass., Senate Majority Leader Chuck Schumer, D-N.Y., called the plan “a giant leap forward in addressing the student debt crisis.”
“The positive impacts of this move will be felt by families across the country, particularly in minority communities, and is the single most effective action that the President can take on his own to help working families and the economy,” they said.
As many as 43 million borrowers are expected to see some debt reduction from the plan, including 20 million who will see their balances wiped, according to the White House. Officials said up to 8 million borrowers may be eligible for automatic student loan debt relief under the newly announced plan because the Education Department already has information on their incomes. Authorities said they will launch a “simple application” before Dec. 31 for those whose information is not available to officials.
Citing data from the non-profit College Board, White House officials noted Wednesday that the cost of attending four-year public and private colleges has nearly tripled since 1980 while federal support for students has lagged. The typical undergraduate student finishes college with nearly $25,000 in debt, according to the Education Department.
Congress suspended student loan payments in March 2020 while passing the Coronavirus Aid, Relief and Economic Security, or CARES, Act. President Donald Trump subsequently extended the pause through January 2021. After he took office in January, Biden directed the Department of Education to pause federal student loan payments several more times.
In the second quarter of 2022, the Federal Reserve estimated that Americans owed more than $1.7 trillion in student loans.
Forgiving $10,000 of student loan debt for each borrower paying back federally owned student loans would cost an estimated $321 billion and eliminate payments for 11.8 million borrowers, accounting for 31% of the total student debt, officials with the Federal Reserve Bank of New York said in April. The analysis did not account for the income limits outlined by officials on Wednesday.
©2022 Cox Media Group