Biden announces long-awaited student debt-forgiveness plan

President Joe Biden on Wednesday announced his long-awaited plan to deliver on his campaign promise to provide $10,000 in debt cancellation for millions of Americans—and up to $10,000 more for those with the greatest financial need.

Borrowers who earn less than $125,000 a year, or families earning less than $250,000, would be eligible for the $10,000 loan forgiveness, Biden announced in a tweet. For recipients of Pell Grants, which are reserved for undergraduates with the most significant financial need, the federal government would cancel up to an additional $10,000 in federal loan debt.

Biden is also extending a pause on federal student loan payments for what he called the “final time” through the end of 2022. He was set to deliver remarks Wednesday afternoon at the White House to unveil his proposal to the public.

If his plan survives legal challenges that are almost certain to come, it could offer a windfall to a swath of the nation in the run-up to 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 erase the federal student debt of about 20 million people.

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 bachelor’s degrees, Black borrowers owe an average of nearly $25,000 more than their white peers, according to a Brookings Institution study.

Still, the action is unlikely to thrill any of the factions that have been jostling for influence as Biden weighs how much to cancel and for whom.

Biden has faced pressure from liberals to provide broader relief to hard-hit borrowers, and from moderates and Republicans questioning the fairness of any widespread forgiveness. The delay in Biden’s decision has only heightened the anticipation for what his own aides acknowledge represents a political no-win situation. The people spoke on the condition of anonymity to discuss Biden’s intended announcement ahead of time.

The continuation of the coronavirus pandemic-era payment freeze comes just days before millions of Americans were set to find out when their next student loan bills will be due. This is the closest the administration has come to hitting the end of the payment freeze extension, with the current pause set to end Aug. 31.

Details of the plan have been kept closely guarded as Biden weighed his options. The administration said Wednesday the Education Department will release information in the coming weeks for eligible borrowers to sign up for debt relief. Cancellation for some would be automatic, if the department has access to to their income information, but others would need to fill out a form.

Current students would only be eligible for relief if their loans were originated before July 1, 2022. Biden is also set to propose capping the amount that borrowers pay monthly on undergraduate loans at 5% of their earnings.

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

As he tried to shore up support among younger voters and prepare for a general election battle against President Donald Trump, Biden unveiled his initial proposal for debt cancellation of $10,000 per borrower, with no mention of an income cap.

Biden narrowed his campaign promise in recent months by embracing the income limit as soaring inflation took a political toll and as he aimed to head off political attacks that the cancellation would benefit those with higher take-home pay. But Democrats, from members of congressional leadership to those facing tough reelection bids this November, have pushed the administration to go as broad as possible on debt relief, seeing it in part as a galvanizing issue, particularly for Black and young voters this fall.

Democrats are betting that Biden, who has seen his public approval tumble over the past year, can help motivate younger voters to the polls with the announcement.

Although Biden’s plan is changed from he initially proposed during the campaign, “he’ll get a lot of credit for following through on something that he was committed to,” said Celinda Lake, a Democratic pollster who worked with Biden during the 2020 election.

A survey of 18- to 29-year-olds conducted by the Harvard Institute of Politics in March found that 59% of those polled favored debt cancellation of some sort—whether for all borrowers or those most in need—although student loans did not rank high among issues that most concerned people in that age group.

Some advocates say Biden’s plan still falls short.

“If the rumors are true, we’ve got a problem,” Derrick Johnson, the president of the NAACP, which has aggressively lobbied Biden to take bolder action, said Tuesday.

“President Biden’s decision on student debt cannot become the latest example of a policy that has left Black people—especially Black women—behind,” he said. “This is not how you treat Black voters who turned out in record numbers and provided 90% of their vote to once again save democracy in 2020.”

John Della Volpe, who worked as a consultant on Biden’s campaign and is the director of polling at the Harvard Kennedy School Institute of Politics, said the particulars of Biden’s announcement were less important than the decision itself.

“It’s about trust in politics, in government, in our system. It’s also about trust in the individual, which in this case is President Biden,” Della Volpe said.

Republicans, meanwhile, see a political upside if Biden pursues a large-scale cancellation of student debt ahead of the November midterms, anticipating backlash for Democrats—particularly in states where there are large numbers of working-class voters without college degrees. Critics of broad student debt forgiveness also believe it will open the White House to lawsuits, on the grounds that Congress has never given the president the explicit authority to cancel debt on his own.

The Republican National Committee on Tuesday blasted Biden’s expected announcement as a “handout to the rich,” claiming it would unfairly burden lower-income taxpayers and those who have already paid off their student loans with covering the costs of higher education for the wealthy.

Biden’s long deliberations have led to grumbling among federal loan servicers, who had been instructed to hold back billing statements while Biden weighed a decision.

Industry groups had complained that the delayed decision left them with just days to notify borrowers, retrain customer service workers 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 inadvertently be told they need to make payments, he said.

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

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34 thoughts on “Biden announces long-awaited student debt-forgiveness plan

  1. Now we just have to wait for the fascists (followers of Donald T. Rump) to come in here and tell us why it’s so bad for the ultrawealthy to start paying taxes to help out those who are in need.

    1. Nope. Spending has been disconnected from Revenue at the federal level for quite some time now. Wouldn’t expect any such argument.

      When you have one party saying ‘vote for me, I’ll spend more on you” and the other saying “I’ll reduce govt revenue from you” but each disconnected from the other, then you have the seeds to fiscal chaos if the dollar stops being the world’s reserve currency.

    2. As one of those proud fascists, “those who are in need” are fundamentally middle and upper-middle class scions of privilege who are being subsidized for their luxury choices, at the expense of the “ultrawealthy” blue collar people who get nothing, but still work and pay the taxes funding this payout. How do we know the “ultrawealthy” won’t end up paying much for this latest folly? Because most of them support the initiative! And our politicos aren’t going to stick it to the people most responsible for funding their campaigns. One hand washes the other, at the expense of the little guy…and you’re here cheering it on.

      Please correct me and inform me how I can become a better fascist. I have work to do.

  2. To “start paying taxes to help out those who are in need.” Good one, Phillip P. Who do you think is paying the overwhelming majority of taxes already?

    1. If true – read the article – you can get a 10k refund from the government. They literally planned this and announces it today.

  3. Page 1 of the Democrat playbook:

    1. Dole out a trillion dollars to buy votes (they even admitted it this time (“Democrats are betting that Biden, who has seen his public approval tumble over the past year, can help motivate younger voters to the polls with the announcement”)).
    2. Repeat.

    1. Trump did worse than that. He slashed corporate taxes, and then waited for the grateful donations to roll in. Almost a quid pro quo bribery scheme for Republicans.

  4. JJ: What Trump did was let people keep their own money. What Biden is doing is taking other people’s money and giving it to those he thinks will vote for him. Big difference.

    1. Troy: If the Fed budget was balanced, your argument would hold more water – but since spending vs taxing advocacy are made in the abstract and disconnected from each other, it’s just politicians designating winners and losers.

    2. What Trump did was let wealthy corporations keep their own money, ran up the deficit and nothing “trickled down” to anybody else.

    1. Have you ever know somebody in their twenties struggling to buy a house or delaying the start of a family because they are being crushed under student loan debt.

      This will be a big boost to the economy and the well being of a lot of Americans.

    2. Straw man argument Dan.

      No one forced these kids to rack up massive debt.

      And nor did many of us who paid our college costs and started families, etc.

      Accountability…check into it.

  5. Why should a ditch digger who didn’t go to college have to pay off the loan of a Dr. or lawyer making 6 figures? That’s what happens when the govt. forgives the loan. It doesn’t just disappear; all taxpayers pay for it.

    What about someone who picked a useless/worthless major with no chance at meaningful employment? Why should the welder who made a wise choice of trade pay for someone who got a degree in Elizabethan Poetry? You made a bad choice; YOU pay for it. Nobody made you pick your major or sign your loan at gunpoint.

    There’s no Magic Money Tree. The President is making the taxpayer is pay to buy votes for the DNC.

    1. I had a guy working for me that got a degree in IT and was making $85K a year and could not buy a house and was delaying a family because he was getting crushed by student loan debt. It is not the rich guys this is going to help. Don’t speak out unless you have seen how bad this is for ordinary people like you.

    2. Dominic – excellent.

      Dan – doesn’t take massive debt to get a computer science degree. And if you work while getting that IT degree, guess what? No debt out of school.

    3. If true – read the article – you can get a 10k refund from the government. They literally planned this and announces it today.

    4. Also – a ditch digger making $7.50/hr working 2,000 hours would pay zero federal taxes…..

    5. JJ -Where in the article does it say that someone who just paid off their loans could get a $10k credit? I missed that part?

  6. I certainly don’t profess to be an expert on Economics at the Federal level, but Larry Summers has worked in several administrations, and thinks this is going to lead to even greater inflation. Ten grand of forgiveness sounds good now, but not when your avocado toast is going to cost $28 a couple of years down the road. Shameless pandering by Joe Biden.

    1. More helicopter money directed to people who will vote for O’Biden. For all of those deferred student loans, this payoff will have zero effect on their new spending since they haven’t been paying for the last two years, but they will feel good to have the debt removed. Interest rates will continue to rise and the interest on the national debt will soar.

      Derrick Johnson said, “This is not how you treat Black voters who turned out in record numbers and provided 90% of their vote to once again save democracy in 2020.” I thought we were trying to treat everyone the same Derrick? But I guess according to Derrick, the 13% of our population is grossly mistreated again. People will whine even about receiving free money. Good grief.

  7. I guess the question that will be answered in November is whether the people whose votes he’s hoping to purchase with this outrageous stunt will be more motivated to fulfill their civic responsibility to vote than they were to fulfill their moral responsibility to pay back their own debts. Because I assure you, the rest of us – the ones who have never expected others to subsidize our borrowing decisions – will be showing up rain, shine, sleet, hail, lightning, or tornado to turn members of the Deadbeat Party out of office.

  8. If they wanted to give money back they could have made every dollar paid towards student loan debt a tax write-off. That way they at least have to practice the behavior of paying off your debts or saving money so that one could pay thwm. Granted this doesn’t affect the hundreds of thousands of people that paid their debts but it’s better than this payoff. Absolutely disgusting what this Presidency is producing. What’s next?

    1. Every company in America!

      We swung towards corporate socialism under trump and Biden is just evening itbout for a small percentage of the population…

  9. 47% are effectively paying the taxes for the entire country.

    And now politicians are choosing to give additional free money to people who don’t have the personal accountability to pay back THEIR choice to rack up a bunch of debt.

    Billions and billions just to buy your vote for a liberal.

    I think every CPA should reduce bottom line taxes paid by every family who attended/paid or currently pays to a college $10-20k per person in their household.

    We made a choice, we paid our bill, we live within our means.

    Time for debt strapped constituents to own up to their bad decisions.

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