Biden Administration to Cancel Some Student Loan Debt
Moratorium on Loan Repayments Extended to Dec. 31
WASHINGTON — President Joe Biden will announce today that he is canceling $10,000 in student loan debt for individuals earning $125,000 or less per year and extending the pandemic-related moratorium on repayment of loans for all borrowers through the end of the year.
The debt relief will also be made available to households earning $250,000 a year or less.
The announcement ends weeks of speculation over the fate of a Biden campaign promise that is expected to provide economic relief to millions of Americans.
In a conference call with reporters shortly before noon on Wednesday, administration officials said as much as 90% of that relief will go to households earning $75,000 a year or less.
Biden will also announce an additional $10,000 of debt forgiveness for students who received Pell Grants in college, focusing the additional aid on people from lower-income backgrounds.
“Earning a college degree or certificate should give every person in America a leg up in securing a bright future. But for too many people, student loan debt has hindered their ability to achieve their dreams — including buying a home, starting a business, or providing for their family,” said Education Secretary Miguel Cardona, in a written statement.
“Today, we’re delivering targeted relief that will help ensure borrowers are not placed in a worse position financially because of the pandemic, and restore trust in a system that should be creating opportunity, not a debt trap,” he added.
In a press release, the Education Department said it will be announcing further details on how borrowers can claim this relief “in the weeks ahead.”
It went on to say the application for relief will be available no later than when the pause on federal student loan repayments terminates at the end of the year.
In addition, it said, nearly 8 million borrowers may be eligible to receive relief automatically because relevant income data is already available to the department.
The department is also making available a legal memorandum regarding its authority for these discharges.
But the debt forgiveness plan is far from universally liked, even among Democrats.
In recent days arguments, even in the White House, reportedly centered on how far the administration should go at a time when the country is still dealing with an elevated inflation rate and the waning vestiges of a public health emergency.
While some Democrats maintain the loan forgiveness will address racial disparities in the economy, critics on both sides of the aisle say the program is unfair to those who made economic sacrifices to attend college and repay their loans.
And there are already widespread predictions that the plan will face a litany of legal challenges in coming weeks.
House Speaker Nancy Pelosi, D-Calif., called the White House announcement a “bold action” and a “strong step in Democrats’ “fight to expand access to higher education and empower every American to reach fulfillment.”
“By delivering historic, targeted student debt relief to millions of borrowers, more working families will be able to meet their kitchen table needs as they continue to recover from the challenges of the pandemic,” she said. “Importantly, this action will help those most in need, easing a financial burden disproportionately harming women and people of color.”
Chairman Robert “Bobby” Scott, D-Va., of the House Committee on Education and Labor, said in a statement that the president is “providing unprecedented relief for America’s student loan borrowers.”
The loan forgiveness and repayment pause, he said, “will help struggling borrowers and families recover from the pandemic, prepare for the return to student loan repayment, and make ends meet.”
“We must also remember that, while debt cancellation is good news for those who currently hold student loans, it does not solve the underlying problems that caused the student debt crisis in the first place: the exorbitant cost of college, the declining purchasing power of the federal Pell Grant, and our flawed student loan system,” Scott said. “Without reversing the chronic underinvestment in higher education that has driven up tuition costs, and without fixing our student loan system that has made student loans more expensive to take out and harder to pay off, students will continue to take on more debt and borrowers will continue to face rising debt levels.”
But Senate Republican Leader Mitch McConnell, R-Ky., said the Democrats had only managed to find “yet another way to make inflation even worse, reward far-left activists, and achieve nothing for millions of working American families who can barely tread water.
“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 their debt, and every American who chose a certain career path or volunteered to serve in our armed forces in order to avoid taking on debt. This policy is astonishingly unfair,” McConnell said.
“The median American with student loans already has a significantly higher income than the median American overall,” he continued. “Experts who studied similar past proposals found that the overwhelming benefit of student loan socialism flows to higher-earning Americans. Democrats specifically wrote this policy to make sure that people earning six figures would benefit.”
McConnell went on to accuse Democrats of “literally using working Americans’ money to try to buy themselves some enthusiasm from their political base.”
“This is cynical and outrageous but perfectly in character for these Democrats,” he said. “Just a few weeks ago, every Senate Democrat voted to tax American manufacturing, ignore inflation, and spend hundreds of billions of dollars on things like electric car charging stations, ‘environmental justice’ grants, and 87,000 new IRS agents.
“This is the one consistent thread that connects Democrats’ policies: taking money and purchasing power away from working families and redistributing it to their favored friends,” McConnell said.
U.S. Sen. John Barrasso, R-Wyo., chairman of the Senate Republican Conference, predicted canceling millions of dollars in student loan debt “will make the pain of high prices even worse.”
“Today’s announcement is an insult to every American who played by the rules and worked hard to responsibly pay off their own debt. This decision is also a boon for Biden’s wealthy supporters. Once again, the Biden administration is selling out working families to appease the far-left wing of the Democrat party,” he said.
It is estimated that 45 million Americans owe $1.6 trillion for federal loans taken out for college, an amount far exceeding what they owe on car loans, credit cards or any consumer debt other than mortgages.