President Biden announced on Wednesday his long-awaited student loan forgiveness plan that will wipe out up to $10,000 in debt for borrowers and up to $20,000 for Pell Grant recipients
The internet immediately erupted with reactions, here’s what people had to say
The new student loan forgiveness plan fulfilled President Joe Biden’s campaign pledge to deliver financial relief for millions of Americans. However, not everyone with debt will qualify. "Both of these targeted actions are for families who need it the most — working and middle-class people hit especially hard during the pandemic making under $125,000 a year," Biden said. "You make more than that, you don’t qualify."
The debt forgiveness applies to current students as well, although future students will not be eligible for relief as it applies to those who took out their loans before July 2022. Undergraduate loan payments will also be no more than 5% of monthly income — down from the 10% available under the most recent income-driven repayment plan.
Moreover, according to the Education Department, the relief is capped at the amount of a borrower’s outstanding eligible debt. "For example: If you are eligible for $20,000 in debt relief but have a balance of $15,000 remaining, you will only receive $15,000 in relief."
As stated in the tweet, the president will also extend the payment pause on most federal student loans "one final time" through December 31, 2022.
In his remarks, Biden said that 95% of borrowers, or about 43 million people, would benefit from these actions. Of those, over 60% are Pell Grant recipients — that’s around 27 million people who will get $20,000 in debt relief.
Altogether, nearly 45% of borrowers would have their debt fully canceled: "That’s 20 million people who can start getting on with their lives," Biden said.
"All of this means people can start to finally crawl out from under that mountain of debt to get on top of their rent and their utilities, to finally think about buying a home or starting a family or starting a business."
If you’re unsure whether you need to take action to receive loan forgiveness, the U.S. Department of Education explained that nearly 8 million borrowers won’t have to lift a finger. Because the department already has relevant income data, they are eligible to receive relief automatically.
If the Department of Education doesn't have your income data (or you don't know if they do), the Administration will launch a short application for people seeking debt relief in the coming weeks. It will be available before the pause on federal student loan repayments ends on December 31st. If you would like to know when the application is available, the Department of Education says borrowers can sign up to be notified here.
Recently, the term "student loan crisis" has become familiar across the U.S. Over 40 million Americans are in debt for their education, owing a cumulative $1.7 trillion. Skyrocketing higher education costs coupled with stagnant wages have historically outpaced inflation in recent decades, as well as caused the amount of student debt to soar. The mean average balance today is over $30,000, up from around $12,000 in 1980.
Although the president had been pushed by Democrats and advocates to deliver deeper relief and cancel $50,000 or more per person as up to $20,000 won’t please everyone, he had repeatedly expressed reluctance to wipe out that much debt. That amount of relief would add up to more than $900 billion and would leave 80% of student loan borrowers no longer owing anything. But that large amount is more likely to be met with political attacks and legal challenges, higher education expert Mark Kantrowitz told CNBC.
"The biggest criticism of forgiving $50,000 is that it provides forgiveness for borrowers who are capable of repaying their own student loans," Kantrowitz said and added it’s usually people with multiple degrees who owe the most. "Republicans, who largely oppose student debt forgiveness, are also less likely to challenge a lower amount of forgiveness simply on the cost factor," he explained.
But as it turns out, the amount of forgiveness does not matter, as the plan still received backlash from Republicans and certain people who already paid their loans or never even borrowed because they saved up in advance, worked their way through college, or simply didn’t go there. In the past few days, Biden’s plan has triggered an avalanche of criticism from Republican lawmakers, the GOP, and a handful of Democratic moderates.
The plan "would unnecessarily provide tens of thousands of dollars to many high-income households in a way that goes well beyond even what he promised in the heat of a Democratic primary when the problem facing the country was low inflation — not high inflation," Jason Furman, a Harvard economist and former top economist for President Barack Obama, told The New York Times. And the Republican National Committee even released a statement blasting the program as "Biden’s bailout for the wealthy."
