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President Joe Biden said on Wednesday his administration would forgive student loan debt for many borrowers and would extend a pause on student loan repayments until Dec. 31 of this year.
Biden said on Twitter that his administration would forgive $20,000 in student loan debt for borrowers who went to college on Pell Grants and would forgive $10,000 for those who did not receive Pell Grants. The plan applies to those who earn less than $125,000 a year.
In keeping with my campaign promise, my Administration is announcing a plan to give working and middle class families breathing room as they prepare to resume federal student loan payments in January 2023.
I'll have more details this afternoon. pic.twitter.com/kuZNqoMe4I
— President Biden (@POTUS) August 24, 2022
The administration said Biden would deliver remarks on the plan at 2:15 pm ET Wednesday.
The move is likely motivated, at least in part, by a potential boost in support for Democrats in midterm elections, but many say it will increase the already out-of-hand national inflation.
Critics point out that the “loan forgiveness” will actually pass the burden of the debt to American taxpayers, many of whom have no student loan debt, and no college education, either.
Biden’s plan to reallocate student loan payments to the working class is theft. Stop calling it “cancelation” or “forgiveness.”
— Katie Pavlich (@KatiePavlich) August 23, 2022
Democrats have pushed for Biden to forgive as much as $50,000 per borrower, arguing that the debt makes it impossible for younger Americans to save for a home down payment or other big consumer purchases. Republicans argue the move will disproportionately help people earning higher incomes.
U.S. consumers carry a massive $1.75 trillion in student loan debt, most of it held by the federal government, the result of private and state-backed university tuition fees that are substantially higher than in most other rich countries.
The administration will extend its pause on student loan repayment through to the end of the year, while also announcing plans to forgive as much as $10,000 in student debt for borrowers whose income falls below $125,000 a year.
It will also cancel up to $20,000 in debt for Pell Grant recipients, some 6 million students from low-income families.
Cutting $10,000 in federal debt for every student would amount to $321 billion of federal student loans and eliminate the entire balance for 11.8 million borrowers, or 31% of them, a New York Federal Reserve study shows.
A pandemic-linked government pause in student loan interest and payments is due to expire at the end of August. Borrower balances have been frozen since the beginning of the COVID-19 outbreak, with no payments required on most federal student loans since March 2020.
Copyright 2022 Thomson/Reuters (Edits and additional reporting by Jacob Fuller, FISM News).