President Biden pledged to make student debt relief a priority during the 2020 election campaign apparently will announce its long-awaited decision on Wednesday.
The exact details of the plan are not known, but the administration has considered canceling $10,000 in federal debt for borrowers making less than $125,000 or $150,000 a year. The Washington Post and Bloomberg has reported. Borrowers have been waiting for a decision on debt cancellation months, some for years. During the presidential campaign, Biden said he would support eliminating federal loans of up to $10,000 per borrower. When he announces such a policy, most of America’s 43 million federal student loan borrowers will be relieved.
How did we get here?
Student debt forgiveness was a major topic of debate in the 2020 Democratic presidential primary, with candidates to the left of Biden proposing more sweeping repeals. Soon after, the Covid-19 pandemic brought the problem to the fore. The Trump administration suspended mandatory student loan payments and interest, and Biden has continued that policy. As each break ended, politicians began arguing again about whether to extend it and what to do about student debt in the long term. The current hiatus expires on August 31.
But the road to repeal began well before 2020, as years of rising college costs and debt have fueled grassroots activism dating back to the Occupy Wall Street movement. Chronicle has previously reported.
Has Biden considered forgiving more than $10,000 per borrower?
Biden has consistently talked about $10,000 in debt relief, despite pressure from allies to do more. For example The NAACP is demanding the government would forgive all borrowers at least $50,000 per borrower, arguing that this is what is needed to close the nation’s racial wealth gap. Several trade unions desire a wider forgiveness. The most liberal members of Congress have called for its repeal total student debtpublic and private.
Republicans, meanwhile, oppose student loan forgiveness. Some centrist Democrats, notably the economist and former Treasury Secretary Lawrence H. Summers, have argued against toward a more modest forgiveness policy, citing the possibility that it could raise inflation.
Who does $10,000 in debt relief help?
in March 2020 Chronicle published an in-depth look at who owns federal student loans in America, based on a variety of data sources. This analysis provides useful context. Among other things, we found:
- A third of Americans with federal student loans owe $10,000 or less, and most debt holders owe less than $20,000.
- While splash stories often feature borrowers with very large loans, borrowers with smaller debts are more likely to have trouble repaying them. Before the pandemic, two-thirds of delinquent federal borrowers owed less than $20,000.
- Even if Biden imposes an income limit on who will be forgiven, most debt holders will qualify. In 2019, 88 percent of federal borrowers reported a family income of $100,000 or less. Chronicle obtained through a public records request at the time. True, this is the family income at the time the borrower took out the loan, not the current income of the borrower. But as Justin Draeger, president and CEO of the National Association of Student Financial Aid Administrators, said Chronicle in June, the $150,000 income limit would exclude very few borrowers. Some advocates argue for the cap to be lifted entirely, saying such a cap would create logistical hurdles for both applicants and the government.