Biden’s debt cancellation plan draws praise and skepticism

President Biden’s plan released Wednesday would reduce the student debt burden of millions of Americans by $10,000, ending months of speculation over whether and how he would follow through on a campaign promise to help borrowers. The president also extended a pandemic-era pause on federal student loan repayments for the last time, saying they would resume in January, not September.

The long-awaited student loan forgiveness plan would be limited to individuals making less than $125,000 a year and families making less than $250,000 a year. Most borrowers within the income limit qualify for up to $10,000 in loan forgiveness; Pell Grant recipients may see up to $20,000 in federal student loan forgiveness.

“All this means is that people can finally crawl out from under that mountain of debt, pay their rent and pay their utilities, finally think about buying a home, starting a family or starting a business,” Biden said. In the White House. “An entire generation is now saddled with unsustainable debt in exchange for trying to at least get a college degree. The burden is so heavy that even if you graduate, you may not have access to the middle-class life that a college degree once offered. Biden also said he will continue to fight to double the maximum Pell Grant on behalf of.

Among the student loan borrowers anxiously awaiting the announcement was Lujain Al-Khawi, 25, who lives near Washington, D.C. Al-Khawi received a scholarship to study engineering at George Washington University and worked 20 to 30 hours a week. throughout his college years, but still had to take out $50,000 in public and private loans to cover his expenses. He hopes the loan forgiveness plan will wipe out the $6,000 in government debt he has left, even though he still owes on his private loans and is now borrowing more to cover the cost of a master’s degree at Johns Hopkins University. earning while working full-time as an algorithm engineer at a medical device company.

“I took this public loan in 2015; it’s been almost seven years. Although I have worked while studying, I could not pay it off due to living expenses,” said Al-Khawi. “I’m very excited about today’s news.”

An estimated 45 million people in the U.S. have about $1.7 trillion in student loan debt. The Biden administration estimates his plan will cancel the entire remaining balance of about 20 million borrowers.

Some critics argue that student loan forgiveness is unfair to those who have never taken out loans or have already paid them off. Some proponents argue that a one-time student loan cancellation won’t solve the college affordability problem. In his speech on Wednesday, Biden talked about how many states have cut aid to public colleges, leaving students and families in the lurch. Pell Grants once covered 80 percent of the cost of a public four-year college degree, he said; today they cover about one-third of the costs.

Sen. Mitch McConnell of Kentucky, the House Republican leader and a longtime opponent of student loan cancellation, said the plan would greatly benefit wealthier Americans. “President Biden’s student loan socialism is a slap in the face to every family who sacrificed to save for college, every graduate who paid off their debt, and every American who chose a certain career path or volunteered to join our armed forces to avoid taking on debt,” McConnell said in a written statement. “This policy is staggeringly unfair.”

Onslaught of questions

Some on the left, on the other hand, argued for more debt relief. NAACP leaders, for example, had previously called on Biden to wipe out $50,000 in debt per borrower, saying that amount would drastically reduce the racial wealth gap. Derrick Johnson, the group’s president, said Wednesday that offering up to $20,000 in debt relief to some borrowers “takes us one step closer to the NAACP’s ultimate goal of easing the student debt burden. We have ways to go, but the NAACP is proud that we were able to give President Biden $10,000 to surpass, bringing us closer to $50,000 and beyond.

Dominique J. Baker, an associate professor of education policy at Southern Methodist University, said eliminating student loans would make borrowers real. “It helps people be more mobile where they want to live. It helps people have more say in the jobs they want to take and the decisions they want to make in their lives,” he said.

But according to Baker, there is still a lot of work to be done.

“I’m really glad people are seeing some relief from this,” he said. “And I want us to continue to work, to continue to reform our system so that college is actually affordable, and to continue to provide relief.”

The National Association of Student Financial Aid Administrators said it expects its members to receive questions from borrowers about who is eligible for loan forgiveness and how to apply. The Board of Education announced on Wednesday that more detailed information will be released soon.

“A lot of the nuances here need further clarification, and financial aid offices live in that nuance,” said association president Justin Draeger.

Draeger emphasized that national policies must be implemented effectively to achieve their goals. He said income-restricted programs would be more successful if the federal government automated the application process, as the Education Department appears to be doing for loan forgiveness. The department said it has relevant income data for nearly eight million borrowers who could qualify for automatic relief as a result.

Universal student loan cancellation once seemed far-fetched, but in recent years it has grown in popularity, particularly among liberal Democrats. As a presidential candidate, Biden promised to cancel at least $10,000 in loans for every borrower.

Biden appears to be trying to court younger voters during the midterm elections, among whom his approval ratings have fallen. But it’s not clear whether the move is a political win for everyone. One poll of 18- to 29-year-old Americans found that while 85 percent favored government action on student loan debt, only 38 percent favored total debt relief. More recently, some critics have questioned whether student loan forgiveness could worsen inflation.

What remains to be resolved is whether the president has the legal authority to write off the arrears. House Democratic Speaker Nancy Pelosi, for example, previously said the president lacks the authority to unilaterally cancel student loan debt. The Board of Education released a legal memorandum on Wednesday, Aug. 23, claiming that the Secretary of Education — Miguel A. Cardona, who appeared at the White House with Biden — has such authority. The memo concluded that a previous memo issued by the Trump administration that claimed otherwise “was substantially incorrect in its conclusions.”

Opponents of the loan cancellation plan are likely to challenge it in court, though it’s unclear who has standing to file suit. Jonathan Fansmith, vice president of government relations for the American Council on Education, said it’s likely that by the time any challenge in the court system is resolved, millions of borrowers will have received relief. This would make it very difficult to require borrowers to continue making payments or to repay loans they believe have been paid.

The department also announced Wednesday that it will create a new income-based repayment plan to reduce the monthly repayment of undergraduate loans for borrowers of any income from 10 percent to 5 percent. Under this plan, borrowers will have their loan balances forgiven after 10 years of payments, rather than the 20 years currently required under many income-based repayment plans for borrowers with an original loan balance of $12,000 or less. Also under the plan, loan balances would not increase while borrowers make monthly payments. The department is also proposing changes to the Public Service Loan Forgiveness Program to make it easier for people who work in the public service to get loan forgiveness.

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