student loan forgiveness

What to Know About Biden’s Student-Debt Plan

Photo: Jemal Countess/Getty Images for We, The 45 Mill

After over a year of deliberation and anxiety from borrowers, President Biden has finally announced his long-awaited plan for student-debt forgiveness. His plan will forgive up to $10,000 of federal student-loan debt for millions of borrowers and up to $20,000 for low- and middle-income borrowers who previously received Pell Grants, fulfilling a campaign promise and making over 40 million Americans eligible for some form of student-loan forgiveness, the Washington Post reports. “My administration is announcing a plan to give working and middle class families breathing room as they prepare to resume federal student loan payments,” Biden wrote on Twitter on Wednesday.

In past discussions about loan forgiveness, Biden had expressed hesitation to extend debt relief to students who attended elite universities, and the income caveats to his current loan-forgiveness plan reflect the White House’s desire to focus relief on those with increased need: Loan forgiveness will only apply to Americans making less than $125,000 a year, or $250,000 for married couples who file jointly. Per the Post, the White House estimates that 90 percent of relief will go to borrowers making less than $75,000, and 20 million Americans could see their debt completely canceled. Per the debt plan, those with undergraduate loans can cap repayment at 5 percent of their monthly income (per the New York Times, the government’s current repayment cap is 10 percent of a borrower’s discretionary income) and the pause on student-loan payments has been extended “one final time” through the end of 2022. Private loans are not eligible for forgiveness, and those who didn’t finish their degrees will not be disqualified.

Across the country, an estimated 45 million Americans owe $1.6 trillion in federal loans taken out for college. Prior to Biden’s announcement, many Democrats and progressive groups pushed for more substantial reform, arguing that $50,000 in forgiveness would more effectively narrow the racial wealth gap for BIPOC borrowers, who are disproportionately affected by student debt. Meanwhile, centrist Democrats and Republicans pushed back against debt forgiveness, arguing it would increase federal deficit and inflation and was unfair to those who already paid off their loans or who did not attend college. While some take the debt plan as a sign of relief, many others consider it a drop in the ocean. “While this announcement is a major win for many, it is important to stress that $10,000 will leave many others still crushed by debt, and important details will determine who has access to much-needed relief,” Natalia Abrams, the president and founder of the Student Debt Crisis Center, told NBC News on Wednesday.

What to Know About Biden’s Student-Debt Plan