Biden to cancel up to $10,000 in student debt for most borrowers and $20,000 for Pell recipients

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Biden to cancel up to $10,000 in student debt for most borrowers and $20,000 for Pell recipients

Student loan forgiveness Biden administration debating details

Biden to cancel up to $10,000 in student debt for most borrowers and $20,000 for Pell recipients
Biden to cancel up to $10,000 in student debt for most borrowers and $20,000 for Pell recipients

The president is also extending the moratorium on federal student loan payments until December 31.

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President Biden speaks at the White House on August 9. (Demetrius Freeman/The Washington Post)

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President Biden said Wednesday he would cancel up to $10,000 in federal student loan debt for many borrowers — and double that amount for Pell Grant recipients — in a move that would help up to 43 million people. can be forgiven to some extent.

The amnesty is expected to apply to Americans who earn less than $125,000 a year, or $250,000 a year for married couples filing taxes jointly. The White House estimates that about 90 percent of the relief would go to people making less than $75,000 and that about 20 million borrowers could have their loans canceled entirely.

The president is also extending the pandemic-era moratorium on federal student loan repayments, which was previously in effect until Dec. 31 under the Trump administration.

My administration is presenting a plan to provide working and middle-class families breathing room as they pay off federal student loans in January 2023, keeping with my campaign commitment, Biden tweeted Wednesday. Preparing to resume payments.” He is expected to discuss the decision further in the afternoon.

Biden to cancel up to $10,000 in student debt for most borrowers and $20,000 for Pell recipients
Biden to cancel up to $10,000 in student debt for most borrowers and $20,000 for Pell recipients

Most student loans have large loans, but most borrowers have small loans.

About 13% of federal student loans owe $20K or less…

32%

38%

5%

8%

17%

“It’s great to see the president taking action to relieve the debt burden of borrowers from the most disadvantaged backgrounds,” said Lindsey Owens, executive director of the Groundwork Collaborative, a left-leaning think tank.

The White House’s decision defies warnings from centrist Democratic economists — such as Larry Summers, the former Democratic Treasury secretary — who has said it would increase inflation and increase the federal deficit. Republican lawmakers are also expected to blast the White House over the measure, arguing that it provides unnecessary subsidies to Americans who make bad decisions while doing little for those who do. What did they not do? did not go for For example

Biden allies clash over student loan cancellation

Previous estimates have found that canceling $10,000 in student loans per borrower could cost the federal government about $230 billion, but that number would be higher with larger amounts for Pell Grant recipients.

“Student loan cancellation is expensive, inflationary, unfair to those who paid off their student loans, and probably illegal,” said Brian Riddle, a policy analyst at the center-right think tank Manhattan Institute. Is.” “It does nothing to prevent universities from raising costs and borrowing more money in anticipation of future loan forgiveness to students.

Republicans have been steadfast in their disapproval of widespread repeal, arguing that Biden would put the burden of a broken student loan system on the backs of taxpayers.

Earlier this month, a group of Republicans, led by Rep. Virginia Foxx (N.C.), released what they called an alternative to Biden’s blanket debt relief plans. The proposal would establish new borrowing limits, lower interest rates, and simplify repayment options while ending popular debt cancellation programs. It also calls for ending the suspension of federal student loan payments.

A recent Government Accountability Office report, requested by Focus, shows that the federal government is on track to lose $197 billion in revenue from the lending program because, in part, of the suspension of payments and interest. From.

On Wednesday, Fox said, “It’s a slap in the face to people who never went to college, as well as borrowers who have maintained their responsibility to taxpayers and paid off their loans. Campus It’s a signal to every freshman who steps in to take on as much debt as possible because taxpayers are picking up the tab.”

Biden to cancel up to $10,000 in student debt for most borrowers and $20,000 for Pell recipients
Biden to cancel up to $10,000 in student debt for most borrowers and $20,000 for Pell recipients

The current period was supposed to end on August 31. But now, about 41 million Americans will have four more months before their payments resume. The ban was first imposed in 2020 due to the economic downturn caused by the pandemic. The Trump administration extended it twice, and the Biden White House has now done so five times.

The latest extension is as much a reprieve for the Department of Education as it is for borrowers. The federal agency has too many initiatives underway — including pulling millions out of default, and helping millions more get closer to debt forgiveness — and limited staff to do it.

More than 100 Democrats in Congress expressed those concerns in a letter to Biden last month, urging the president to maintain the suspension of payments while the department implements the measures. He argued that resuming payments would force millions to choose between paying off their debts and living costs as consumer prices sit at record highs.

Still, the Biden administration has frustrated borrowers, policymakers, and its student loan lenders by waiting days to announce the extension before payments can resume. The delay confused me, as some borrowers mistakenly received resumption notices from their servers.

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