Biden to announce $10,000 in student loan debt forgiveness and boosts for Pell Grant recipients
The President will finally announce the widespread debt relief for borrowers that he pledged in the 2020 election.
After months of uncertainty President Biden is set to announce that his administration will cancel $10,000 from the student loan debt burden of all Americans earning $125,000 or less.
Widespread debt forgiveness was key campaign pledge in the 2020 presidential election and Biden looks set to make good on that promise after 18 months in the White House.
The New York Times reports that Biden will give a White House address on Wednesday in which he outlines the new support on offer, having recently returned from Delaware. Alongside the headline figure of $10,000 per borrower is a boost for Pell Grant recipients which is worth up to $20,000 per borrower. Pell Grants are typically awarded to students from lower-income households.
Finally the administration will once again extend the pause on student loan repayments that has been in effect since the start of the pandemic. The pause, which not only halts payments but also prevents interest being accrued on the balance, had been scheduled to finish at the end of this month but the end date looks set to be pushed back to December.
Who will benefit most from Biden’s student debt forgiveness plans?
Many people, including a significant number in his own party, had called on Biden to offer debt forgiveness of up to $50,000 per person, or even to cancel student debt entirely. However concerns over exacerbating inflationary pressures at a time of economic instability meant that a more limited proposal was favoured.
The initiatives set to be announced today focus on students from low-income families, heading off likely Republican criticism of plans that benefit high earners. The debt relief is available for individual borrowers earning no more than $125,000 per year. For households, that threshold is upped to $250,000.
The White House has claimed that 90% of the debt relief provided in this announcement will go to households earning less than $75,000 per year. Across the country more than 45 million people owe $1.6 trillion in federal student loans.
In theory the new debt forgiveness initiatives could cost the federal government around $300 billion: the total value of loans that were issued but will not have to be repaid. However in practice the amount is expected to be considerably less because a significant proportion of student loan debt is never fully repaid. There are currently around seven million people who have defaulted on their student loan repayments, the equivalent of around one in five borrowers. Many will never pay back the full amount.
Whatever the cost of the debt forgiveness, it is a vital political win for Biden after 18 months of speculation and one that he will hope gives the Democrats some momentum heading into the midterm elections.