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Home News

Joe Biden to announce cancellation of $10,000 student loan!

Nitish Shevkani by Nitish Shevkani
November 4, 2022
in News
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WASHINGTON — US President Joe Biden is expected to announce Wednesday that he will forgive $10,000 in student loan debt for millions of borrowers who fall below an income cap, according to people familiar with the plan.

After months of weighing the executive’s action, the president is set to reveal his long-awaited decision after returning to the White House from a vacation in Rehoboth Beach, Delaware. The action is also expected to include extending until January a pause on federal student loan payments – implemented during the coronavirus pandemic – which is set to expire at the end of this month.

The White House would not confirm the upcoming announcement, first reported by The Associated Press.

The president said he would make a decision by August 31. Biden is facing growing pressure from progressive Democrats to write off even more of the debt of Americans who have taken out federal loans to pay for their education. But some Democratic economists, including former Treasury Secretary Larry Summers, worry about the risk of debt cancellation exacerbating 40-year high inflation.

Sequel: Biden carefully considers student loan debt forgiveness, but less than $50,000

What the president plans

  • The White House has focused on a plan that would forgive $10,000 of student loan debt per eligible borrower, sources said, matching a figure Biden campaigned on. The White House has also discussed extending relief beyond $10,000 for borrowers who meet certain criteria, a source said.
  • Debt forgiveness would be limited to borrowers with household incomes of $125,000 or less and would only apply to people with federal loans, not private ones.
  • More than 43 million people have federal student loan debt in the United States, and the average borrower has about $37,000, according to data compiled by the Education Data Initiative. The outstanding federal loan balance is approximately $1.6 trillion.
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Next: Biden aides ‘talk daily’ about student loans, expect a decision soon: Education Secretary Cardona

Progressive Democrats pushed for more

    • Forgiveness of $10,000 in student loan debt could receive mixed reviews from progressive groups — including the NAACP, Congressional Black Caucus, and labor unions — who have called for greater debt forgiveness. Some liberals have urged Biden to forgive all student loan debt. Top Democrats, including Majority Leader Chuck Schumer, DN.Y., and Sen. Elizabeth Warren, D-Mass., have pressured Biden to forgive at least $50,000 in student loan debt.
    • “If the rumors are true, we have a problem. And tragically, we’ve been through this so many times before,” said Derrick Johnson, president, and CEO of the NAACP, which called for a minimum student debt cancellation of $50,000.
  • The income cap for eligibility – designed to prevent wealthy Americans from benefiting – is another point of contention for progressive activists, who say it would create a bureaucratic mess and prevent millions of borrowers from getting a loan. relief.
  • “The means test hoops mean millions and millions of borrowers will not get help,” said Melissa Bryne, executive director of We The 45 Million, which represents student borrowers advocating for the cancellation of student debt. She called it an “outrageous violation” of Biden’s campaign pledge to forgive all borrowers’ student loan debt.

The risk of inflation weighs on the decision

  • Biden said in April he was looking closely at executive action to write off federal student loan debt. At the forefront of the White House’s considerations in the months that followed: the possible impact on inflation, which soared throughout the year.
  • Canceling potentially up to $10,000 in student loan debt would mean billions more would collectively stay in Americans’ pockets. Some critics argue that the extra money consumers can spend risks fueling demand and further accelerating historic inflation.

Next: How soaring inflation is complicating Biden’s decision on whether or not to forgive student loan debt

  • Summers, a former Clinton administration treasury secretary and economic adviser to Barack Obama, led warnings about the impact on inflation and said canceling student debt would disproportionately help top-earning Americans. Jason Furman, Obama’s chairman of the Council of Economic Advisers, raised similar concerns.
  • “Student debt relief is an expense that increases demand and increases inflation,” Summers said in a tweet on Monday. “It consumes resources that could be put to better use helping those who haven’t, for whatever reason, had the chance to go to college. It will also tend to be inflationary by increasing tuition fees.”

The impact on Borrowers

  • A Liberty Street Economics study found that forgiving $10,000 per borrower would wipe out $321 billion in student loan debt and completely wipe out the debt of about a third of borrowers, or about 12 million people.
  • A separate study this week by the Wharton School at the University of Pennsylvania found that canceling $10,000 in federal student loan debt will cost the federal government between $300 billion and $980 billion over 10 years.
  • The Biden administration has already erased about $32 billion in student debt for 1.6 million borrowers by expanding eligibility for pre-existing relief programs, such as the Civil Service Loan Forgiveness Program.

Next: Young people want student debt relief. But not everyone wants it canceled, poll finds

A midterm boost for Democrats?

Canceling some student loan debt – a hugely popular idea among young, left-leaning voters – could energize a key voting bloc that showed signs of lack of enthusiasm in November’s midterm elections.

A USA TODAY/Public Agenda poll in July found that nearly 60% of Americans favor “canceling a significant portion of government student loans for college graduates with excessive debt.” That support rate plummeted when Americans were asked about debt forgiveness for all graduates, regardless of income.

Opinion: “Forgiving” student loans aren’t motivated by kindness. It’s all about cold, hard politics.

Planning their line of attack, Republicans criticized student debt cancellation as a ploy to reward the liberal and academic elite and punish those who could not afford college or had to save to pay off their debt. They also said it would drive up inflation.

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“Joe Biden had a lot of bad ideas,” Sen. Tom Cotton, R-Ark., said Tuesday. “But shifting billions of dollars in student loans to taxpayers — especially in times of high inflation — might be his worst idea yet.”

Sequel: ‘A boon for the rich’: Republicans plot attacks as Biden weighs forgiving student debt.

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