President Biden announced student loan debt relief on Wednesday for tens of millions of Americans, saying he would cancel $10,000 in debt for those earning less than $125,000 per year and $20,000 for those who had received Pell grants for low-income students.
“Education is a ticket to a better life. … but over time that ticket has become too expensive for too many Americans,” Biden said during a speech from the White House. “All this means that an entire generation is now saddled with unsustainable debt in exchange for an attempt at least at a college degree. The burden is so heavy that even if you graduate you may not have access to the middle-class life that the college degree once provided.”
The debt forgiveness, although less than what some Democrats had been pushing for, comes after months of deliberations in the White House over fairness and fears that it could exacerbate inflation before the midterm elections.
The President’s sweeping plan on student loans follows extended, down-to-the-wire negotiations at the White House among stakeholders and lawmakers ahead of when payments were set to resume at the end of this month.
“All of this means people can start finally to climb out from under that mountain of debt,” Mr. Biden said in remarks from the White House. “To finally think about buying a home or starting a family or starting a business. And by the way, when this happens the whole economy is better off.”
The decision is already disappointing many, with those on the left arguing that the President should have provided even more loan forgiveness and those on the right asserting that Biden is punishing Americans who avoided going into debt. But it fulfills one of Biden’s campaign promises, issuing major reforms to America’s student loan system and providing relief to millions of current and future borrowers.
Students who received Pell grants will be eligible for $20,000 in debt forgiveness. Around 60 percent of borrowers have received Pell grants, and the majority come from families making less than $30,000 a year. The Education Department estimates that 27 million borrowers will qualify for up to $20,000 in relief.
The Department of Education will announce details on how borrowers can claim this relief in the coming weeks, with the application expected to be available no later than when the pause on repayments terminates at the end of December. Millions of borrowers will be able to receive relief automatically based on existing income data.
Millions of other borrowers will be eligible for $10,000 in debt relief, as long as they earn less than $125,000 a year or are in households earning less than $250,000. Current students are also eligible for the debt relief; if they are dependents they will be assessed based on their parents’ income.
Ms. Ramirez, whose parents immigrated from Mexico, was the first in her family to go to college. She used the grants to cover two years of study at a community college, than transferred to the University of California, Los Angeles, and graduated in 2020 with a bachelor’s degree in anthropology. Scholarships and aid covered her tuition, but she has $25,000 in federal loans that she used to cover her housing and living expenses.
The proposal would also “raise the amount of income that is considered non-discretionary income and therefore protected from repayment.” And it would forgive loan balances after 10 years of payments rather than 20 years under many income-driven repayment plans for borrowers with original loan balances of $12,000 or less, the department said.
Key Democratic lawmakers, including Senate Majority Leader Chuck Schumer and Massachusetts Sen. Elizabeth Warren, had called on Biden to cancel $50,000 per borrower. The President spoke with Schumer, Warren and Democratic Sen. Raphael Warnock of Georgia on Tuesday ahead of the expected announcement.
“An entire generation is now saddled with unsustainable debt in exchange for an attempt at least at a college degree,” Biden said. “The burden is so heavy that even if you graduate, you may not have access to a middle class life that a college degree once provided.”
The debt forgiveness applies to undergraduate, graduate and Parent Plus loans. Current students can also qualify, but students who were claimed as dependents will be eligible based on their parent’s income rather than their own.
The highly anticipated announcement comes after months of pressure from Democrats and student debt relief advocates for Biden to use his presidential authority to cancel student debt.