President Biden said Wednesday he will cancel up to $10,000 in federal student loan debt for many borrowers — and double that amount for Pell Grant recipients — a move that could offer some level of forgiveness for up to 43 million people, the Washington Post reported. The forgiveness is expected to apply to Americans earning under $125,000 per year, or $250,000 per year for married couples who file taxes jointly. The White House estimates that nearly 90 percent of relief will go to people earning less than $75,000 and that roughly 20 million borrowers could have their debt completely canceled. The president is also is extending a pandemic-era pause on federal student loan payments, first implemented under the Trump administration, through Dec. 31, and proposed creating a new income-based repayment plan to lower monthly bills for undergraduate borrowers. Current students with loans are eligible for relief, if their household income was under $250,000 during the last federal student aid award year. Loans must have been originated before July 1 to qualify. The Biden administration also proposed creating a new repayment plan tied to borrowers’ earnings, capping monthly payments for undergraduate loans to 5 percent of a person’s discretionary income instead of 10 percent. It also would raise the amount of income that is considered non-discretionary, and forgive balances after 10 years of payments, instead of 20 years. The White House’s decision rejects the warnings of centrist Democratic economists — such as Larry Summers, the former Democratic treasury secretary — who have said it will increase inflation and add to the federal deficit. Republican lawmakers are also expected to blast the White House over the move, arguing it offers unnecessary subsidies to Americans who made bad decisions while doing nothing for those who did not go to college. Additionally, the executive order will likely face legal opposition, said Lanae Erickson, who heads social policy at Third Way, a centrist Democratic think tank. She suspects the policy could be challenged on the same grounds as the West Virginia v. Environmental Protection Agency case, in which the Supreme Court ruled the federal government can’t act on policy with broad economic significance without clear congressional authorization. Read more.
For more information from the White House on the announcement, please click here.
