Biden Reveals His Plan for Canceling Student Loan Debt

Many borrowers will see $10K in loan forgiveness
By Newser Editors and Wire Services
Posted Aug 24, 2022 11:02 AM CDT
Your Student Loan Balance May Now Be $10K Smaller
President Joe Biden waves after returning to the White House in Washington, Wednesday, Aug. 24, 2022. Biden and his family spent time in Delaware for summer vacation.   (AP Photo/Susan Walsh)

On Wednesday President Biden made good on his campaign promise to ease the burden of federal student loan debt. Under Biden's plan, many Americans will be granted $10,000 in debt cancellation; those with the greatest financial need could see an additional $10,000 wiped away. The specifics, per a tweet from the president and the AP:

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

  • Biden also extended a pause on federal student loan payments for what the White House calls the "final time" through the end of 2022.
  • 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.
  • The Washington Post cites previous estimates that put the cost of canceling $10,000 per borrower at about $230 billion; that doesn't include the Pell Grant relief.
  • CNN points out the problem of college affordability is a big one that's unchanged by today's announcement. To wit, the Committee for a Responsible Federal Budget found total federal student loan debt, currently at $1.6 trillion, will be back at that level within four years of wiping out $10,000 per borrower.
(Read more Joe Biden stories.)

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