What is Biden’s plan to forgive up to $10,000 in student debt?
Biden has made statements publicly supporting the cancellation of up to $10,000 in student debt through executive action… when could it happen?
Student debt reached 1.56 trillion dollars in 2020. Just over half of student debt is held by people under thirty-nine, and people between eighteen and twenty-nine owe nearly a quarter.
A 2018 study found that most millennials owe the same amount of debt as Gen Xers and Baby Boomers, around $37,000. What worries economists is that the debt owed by older generations relates to assets that they own, their home. While younger generations are paying historic levels of debt for something that may not show the same return.
Student debt has made some millennials less likely to take on additional debt, like a mortgage which could have lasting economic implications. This has led some lawmakers and activists to call for debt forgiveness or cancellation. On Tuesday, 27 April, Senator Elizabeth Warren held a hearing and called on President Biden to cancel student debt.
During her remarks, the senator called student debt a “time bomb” and warned that “when it explodes, [it] could throw millions of families over a financial cliff.” Warren continued saying that the fact that many borrowers pay around $400 in payments each month represents a drag on the economy.
The Senator also spoke to the racial disparities regarding the student debt crisis and highlighted the disproportionate impact student loans have on Black borrowers. The American Civil Liberties Union compared the percent of the debt owed nearly two decades after borrowers had acquired their student loan debt and found that while white borrowers only owed around 6%, Black borrowers still owed around 95%.
What has Biden done so far regarding student debt?
One of the first actions Biden took when he came into office was to extend the suspension of principal and interest payments on student debt to 1 October 2021.
Forgiving student debt is broadly popular, with a recent survey showing that around 58% of the public in support. President Biden has stated that he supports debt forgiveness and is considering canceling up to $10,000 worth of student debt per borrower through executive action.
Some political analysts were surprised that Biden did not mention student debt during his first address to Congress this week. The speech focused primarily on two major legislative proposals the administration has sent to Congress, the American Jobs Plan and the American Families Plan. While the American Families Plan does not call for debt cancellation, it would provide two years of free community college to students in the United States.
While no dates on when a possible announcement on debt cancellation has been released, the conversation is very much active. Higher education expert, Mark Kantrowitz, told CNBC that forgiving $10,000 worth of student debt could bring the total debt owed down to $1.3 trillion, and nearly 15 million people “would see their balances reset to zero.” Mr. Kantrowitz also stated that news on whether the administration will pursue cancellation through executive action should be known by June or July of this year.