The Guardian (USA)

Biden unveils plan to cancel $10,000 in student loan debt for millions

- Chris Stein in Washington, Lauren Aratani in New York and agencies

Millions of Americans received welcome news on Wednesday when Joe Biden delivered on a campaign promise to provide $10,000 in student debt forgivenes­s.

Borrowers who earn less than $125,000 a year will be eligible for loan forgivenes­s, with those whose low incomes qualified them for federal Pell Grants receiving up to $20,000 in relief. About a third of US undergradu­ate students receive Pell Grants.

Biden also extended a pause on federal student loan payments through the end of the year. The White House said it would be the last pause, and borrowers should expect to resume payments in January.

If it survives probable legal challenges, Biden’s plan could offer a windfall to many Americans in the run-up to midterm elections in November. More than 45 million owe a combined $1.7tn in federal student debt. Almost a third owe less than $10,000, according to federal data.

Biden also proposed a new income-driven repayment plan that would cap loans for low-income future borrowers and introduce fixes to the loan forgivenes­s program for non-profit and government workers.

“Twelve years of universal education is not enough,” Biden said, announcing the plan at the White House. “How do we remain the most competitiv­e nation in the world with the strongest economy in the world with the greatest opportunit­ies?

“That’s what today’s announceme­nt is about. It’s about opportunit­y. It’s about giving people a fair shot. It’s about the one word America can be defined by: ‘possibilit­ies’. It’s about providing possibilit­ies.

Biden noted that the federal government gave loans to small businesses during the Covid pandemic.

“Now, it’s time to address the burden of student debt the same way.”

Biden added that “an entire generation is now saddled with unsustaina­ble debt.

“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 burden is especially heavy on Black and Hispanic borrowers who, on average, have less family wealth to pay for it.”

Biden said more informatio­n on the plan would soon be released and borrowers who qualify for forgivenes­s could expect a “short and simple form to apply for this relief”, sent by the Department of Education.

The US has a long history of student debt, the vast majority owed to the federal government, which has been offering loans for college since 1958. US student debt has more than tripled over the last 16 years.

Senior Democrats on Capitol Hill cheered Biden’s announceme­nt. The Senate majority leader, Chuck Schumer, and the Massachuse­tts senator Elizabeth Warren, a longtime advocate of the policy, issued a joint statement.

They said: “With the flick of a pen, President Biden has taken a giant step forward in addressing the student debt crisis by cancelling 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.”

The senators added that Democrats would continue with efforts “to help close the racial wealth gap for borrowers and keep our economy growing”.

Biden has faced pressure from liberals to provide broader relief. The cancellati­on falls short of the $50,000 many activist groups wanted. Some groups have called for full student debt cancellati­on.

“If we can cancel $10k, we can cancel it all,” the Debt Collective, a union of debtors, tweeted on Wednesday.

Administra­tion officials claimed the plan could reduce inflation. The top Senate Republican, Mitch McConnell, argued that it would worsen the problem.

McConnell said: “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.”

Biden’s continuati­on of the pandemic loan payment freeze came just days before millions were set to find out when their next student loan bills were due. The end of the payment freeze extension was set for 31 August.

During the 2020 presidenti­al campaign, Biden was initially skeptical of student debt cancellati­on as he faced progressiv­e candidates including Warren and Bernie Sanders, the democratic socialist senator from Vermont.

On Wednesday, Sanders hailed “a great step forward” but said: “We have got to do more.”

As he tried to shore up support among younger voters, Biden unveiled a proposal for debt cancellati­on of $10,000 per borrower, with no mention of an income cap. That campaign promise was narrowed in recent months by embracing the income limit.

Democrats pushed the administra­tion to go as broad as possible, seeing debt relief as a galvanizin­g issue, particular­ly for Black and young voters.

‘There’s been a dramatic shift in how Americans think about the role of government in helping people out for college,” said Brian Powell, professor of sociology at Indiana University Bloomingto­n who co-authored a book on the student loan crisis.

Powell noted that support for debt cancellati­on and college affordabil­ity has grown. Those who go to college make on average $30,000 more a year than those with just a high school degree.

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