President announces student loan debt forgiveness plan

On Wednesday, President Joe Biden announced a detailed plan to provide $10,000 in student debt cancellation for millions of Americans — and up to $10,000 more for those with the greatest financial need — along with measures to lower the burden of repayment for their remaining federal student debt, fulfilling a campaign promise.

In a public address, President Biden outlined that borrowers who earn less than $125,000 a year, or families earning less than $250,000, would be eligible for up to $10,000 loan forgiveness. For those who also receive Pell Grants, which are awarded to students with the most significant financial need, the federal government would cancel up to an additional $10,000 in federal loan debt.

“Both of these targeted actions are for families who need it the most: working and middle class people hit especially hard during the pandemic,” Biden said in remarks at the White House Wednesday afternoon.

President Biden went on to say that he is also extending a pause on all federal student loan payments for what he called the “final time” through the end of 2022.

Reaction to the President’s announcement was swift from both sides of the political aisle, with supporters saying cancellation of some part of the student loan debt will narrow the wealth gap and ease financial burdens of those long dealing with student loan repayments.

In a joint statement, Senators Elizabeth Warren and Chuck Schumer, the Senate Majority Leader, said: “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.” Other, more progressive members said President Biden’s plan doesn’t go far enough.

Meanwhile, Republicans question the fairness of any widespread forgiveness, and the opposition worried that President Biden’s plan will only add to current inflation worries, with Senate GOP leader Mitch McConnell saying, “President Biden’s inflation is crushing working families, and his answer is to give away even more government money to elites with higher salaries.”

Closer to home, Alaska Senator Lisa Murkowski voiced her opposition to the President’s proposal.

In a statement, Senator Murkowski said that while cancelling some student loan debt for some Alaskans may help ease financial strains, she worries about what that action would mean for the national debt, and what Americans would end up paying:

“As I travel to communities across Alaska I continue to hear how individuals and families are being impacted by rising inflation—from paying for fuel to their grocery bills and other basic necessities. While cancelling some student loan debt for some Alaskans will help ease their budgets after the repayment pause expires, there is no such thing as ‘cancelling’ student loans. This action would add $300 billion to our national debt that every American will be on the hook to pay.”

Senator Murkowski is a co-sponsor of a bill that addresses student loan debt. The State-Based Education Loan Awareness Act would tackle the issue by allowing Institutions of Higher Education (IHEs) to inform students that low-cost loan options are available through their own non-profit state agency lenders. There are conditions to this, including loans are authorized, established, or charted under State law; the state agency lender offers 1 or more loans with interest rates at least as favorable as the interest rate and fees of the Direct PLUS Loan; and information is only made available to borrowers who’ve been advised by the IHE.

Other components of the proposal include allowing students and families-especially those without previous college experience-to make fully-informed decisions on how to pay for postsecondary education, improving access to postsecondary education, particularly low-income and middle class families, and continuing to protect students and families from loans that are not in their best interest.

Senator Murkowski continued on, saying that colleges should be able to help students find affordable loans and that people should be fully informed of their options.

“I am empathetic to the burden of high student debt, and I’ve been working to try to reduce the cost of education to avoid these high debts in the first place. I also supported a pause on student loan repayments during the pandemic, but those who borrow money have a duty to repay it,” she said in her statement.

She then echoed the sentiment many opposing President Biden’s plan:

“It seems to have escaped the President’s notice that this debt is owed to the American people who finance student loans through their taxes—many of whom have no student loans. Additionally, this loan forgiveness does not recognize the sacrifice of many Americans who scrimped and saved to pay off their student loans. Nor will it help those who take on new student loan debt tomorrow and in the years to come, or those whose federal student loans are not owned by the federal government. There are a number of other commonsense alternatives to address this issue, but this is not the appropriate path forward.”

President Biden’s plan will likely bet met with legal and legislative challenges.

Currently, more than 43 million people have federal student debt, with an average balance of $37,667, according to federal data. Nearly a 1/3 of borrowers owe less than $10,000, and about half owe less than $20,000. According to White House estimates, the President’s plan could ease the federal student debt of about 20 million people.

“That’s 20 million people who can start getting on with their lives,” President Biden said. “All this means, people can start to finally crawl out from under that mountain of debt. To get on top of their rent and utilities. To finally think about buying a home or starting a family or starting a business.”

For some, the relief plan cannot come soon enough, as massage therapist Michelle said, “I’m not a fan of the president, but as a single mother struggling to make ends meet, this is huge.” She went on to add that while she is thankful, she wishes that the relief plan income cap was lower than the proposed $125,000.

The White House emphasized that no one in the top 5% of incomes would see any loan relief.

Current students would be eligible for relief only if their loans were originated before July 1, 2022. Biden is also proposing capping the amount that borrowers must pay monthly on undergraduate loans at 5% of their earnings, down from 10% previously. The Education Department is to post a proposed rule supporting that, which would also cover the unpaid monthly interest for borrowers who remain current with their monthly payments — even when the payments are $0 because their incomes are low.

President Biden’s plan builds on $32 billion in targeted student debt forgiveness his administration has enacted for certain groups of borrowers. Much of that went to borrowers who say they were defrauded by for-profit colleges.

The administration also temporarily has relaxed the rules for Public Service Loan Forgiveness, a complex program that allows teachers, social workers and other public servants to get student debt canceled after 10 years of monthly payments.

President Biden said it has become too expensive for many Americans to go to college.

“The burden is so heavy that even if you graduate, you might not have the ticket that graduating college once offered.”