THE TRANSATLANTIC MAGAZINE
THE TRANSATLANTIC MAGAZINE
President Joe Biden has announced he will forgive $10,000 in federal student debt for most borrowers. The move will deliver financial relief to tens of millions of Americans and 9 million could have their loan balances entirely wiped out. It fulfills one of Biden's campaign pledges and the decision was taken following months of debate among White House officials. The midterm elections in November are believed to have been one motivation for the decision. President Biden has been losing popularity among younger voters according to polls.
Recipients of Pell Grants (special funding for undergraduate students who have displayed exceptional financial need) will have up to $20,000 canceled.
There is a limit to the relief: it will only apply to Americans earning under $125,000 per year, or $250,000 for married couples or heads of households, and it will be capped at the total amount of a borrower's outstanding debt, said the Education Department. Some people including NAACP and Senate Majority Leader Chuck Schumer had lobbied to cancel $50,000 or even more per person, but Biden repeatedly expressed his reluctance to cancel that amount of debt for all borrowers.
The payment pause on most federal student loans, introduced by the Trump administration during the Covid-19 pandemic, will be extended "one final time" through December 31, 2022, according to a tweet by the President.
The student debt cancellation plan will cost the federal government around $244 billion, said Mark Kantrowitz, a higher education expert. The $20,000 Pell Grant relief could add a further $120 billion to government costs.
The amount of student debt is phenomenal: more than 43 million Americans owe money for their education, totaling $1.7 trillion according to federal government data. Half of them were in delinquency or default or have applied for temporary relief.
Some commentators have criticized the move, saying that it benefits college graduates who need assistance less than some others. Beth Akers, a senior fellow at the center-right American Enterprise Institute, said "Economists generally agree that widespread loan cancellation is regressive, delivering the biggest bailout to those who need it the least." She added, "The forgiveness will only worsen the lending crisis."
"All of these fat cats, and people who never want to see help for working people and poor people come up with these myths," Schumer said in June, in one of his many pushes for $50,000 in student debt cancellation. "This is not a problem that concerns the wealthy."
Schumer and Senator Elizabeth Warren, both of whom had advocated for student loan relief for a long time, issued a joint statement, which said in part: "With the flick of a pen, President Biden has taken a giant step forward in addressing the student debt crisis by canceling significant amounts of student debt for millions of borrowers. The positive impacts of this move will be felt by families across the country, particularly in minority communities, and is the single most effective action that the president can take on his own to help working families and the economy."
So far Biden has tweeted the basics of his plan. He is expected to give more details soon.
