US forgives some student loan debt for borrowers under $125,000

On Wednesday, President Joe Biden unveiled a long-awaited plan to deliver on his campaign promise to provide millions of Americans with $10,000 in debt relief.

Borrowers earning less than $125,000 a year, or households earning less than $250,000 a year, are eligible for a $10,000 loan forgiveness, Biden announced in a tweet. For recipients of Pell grants reserved for undergraduates with the most significant financial need, the federal government will cancel up to an additional $10,000 in federal loan debt.

Biden is also extending a moratorium on federal student loan payments through the end of 2022, dubbed the “Final Term.”

If his plan survives the likely legal challenge, it could bode well for parts of the country heading into this fall’s midterm elections. According to federal data, more than 43 million people have federal student loans, with an average balance of his $37,667. About a third of borrowers said he owed less than $10,000, and about half said he owed less than $20,000. The White House estimates that about 20 million federal students will be debt free with Biden’s announcement.

Proponents say the cancellation narrows the racial wealth gap.Black students are more likely to take out federal student loans and pay more than other students.Brookings Institution study , four years after completing a bachelor’s degree, black borrowers owe an average of nearly $25,000 more than white borrowers.

Still, the action is unlikely to excite any of the factions vying for influence, as Biden weighs how much and for whom he will cancel.

Biden has come under pressure from liberals to offer broad relief to hard-hit borrowers. Moderates and Republicans question the fairness of the broader forgiveness. Biden’s delay in making the decision only raised hopes that what his own aides have admitted represented a politically unwinnable situation. We discussed the announcement in advance.

The continuation of the coronavirus pandemic-era payment freeze comes just days before millions of Americans were set to find out when their next student loan bill will be paid. is the closest to ending the extended payment freeze, with the current suspension set to end on August 31st.

US students had $1.6 trillion in student loans at the end of March. (AP graphic)

Details of the plan have been closely guarded as Mr. Biden weighs his options. The administration said Wednesday that the Department of Education will release information for eligible borrowers to sign up for debt relief in the coming weeks. but others must fill out a form.

Current students are only eligible for relief if their loans started before July 1, 2022. Biden also plans to propose limiting the amount borrowers pay each month on undergraduate loans to 5% of their income.

During the 2020 presidential election, Biden was initially skeptical about writing off his student loan debt. Senators Elizabeth Warren (D-Mass.) and Bernie Sanders (I-Vt.) had proposed cancellations of over $50,000.

Biden, who was trying to strengthen his support among younger voters and prepare for the general election campaign against President Donald Trump, revealed the first proposal for $10,000 debt relief per borrower without mentioning an income cap. Did.

Mr. Biden has narrowed his campaign promises in recent months by accepting income limits. The cancellation will benefit those with higher take-home pay, as inflation spikes have dealt a political blow and were aimed at deterring political aggression. But Democrats, from members of the congressional leadership to those facing a tough re-election this November, have called the government for debt relief, which they see as a particularly exciting issue for black and young voters this fall. pressure to work as broadly as possible on

Democrats are confident that the announcement will help Biden, whose public approval ratings have dwindled over the past year, to get younger voters into the polls.

Serinda Lake, a Democratic pollster who worked with Biden in the 2020 election, said that Biden’s plan has changed from what he first proposed during the campaign, but that “he has done what he promised. You’ll get a lot of credit for it.”

A Harvard Political Institute survey of 18- to 29-year-olds in March found that 59% of those surveyed supported some form of debt forgiveness, whether they were all borrowers or the most in need. I understand. Among the issues most relevant to people in that age group.

Some supporters say Biden’s plan still falls short.

“If the rumors are true, we have a problem,” said Derrick Johnson of the NAACP, who is actively pushing Biden to take bold action, on Tuesday.

“President Biden’s decision on student loans cannot be the latest example of a policy that has left black people, especially black women,” he said. “This is not how we treat black voters who voted in record numbers and provided 90% of the vote to save democracy again in 2020.”

John Della Volpe, who worked as a consultant for the Biden campaign and is the polling director at the Harvard Kennedy School of Political Institute, said the details of Biden’s announcement were less important than the decision itself.

“It’s trust in politics, in government, in our system. It’s also trust in individuals, in this case President Biden,” said Della Volpe.

Republicans, meanwhile, believe that if Biden pursues a large-scale cancellation of student loans ahead of the November midterm elections, it will be politically uplifting, especially for working-class voters without college degrees. Democrat backlash is expected in states with large numbers. Critics of the broad student debt forgiveness believe the White House could also file a lawsuit.

The Republican National Committee on Tuesday denounced Biden’s expected announcement as “a subsidy for the wealthy,” by covering the cost of higher education for low-income taxpayers and those already students. He argued that it would impose an undue burden on those who repaid the loans.

Biden’s lengthy deliberations have led to complaints among federal loan servicers, who had been instructed to withhold billing statements while Biden considered the decision.

Scott Buchanan, executive director of the Student Loan Servicing Alliance, said trade groups have notified borrowers, retrained customer service representatives and updated their websites and digital payment systems due to the delayed decision. He complained that he had only a few days left to do so.

He said it would increase the risk of some borrowers being inadvertently told they need to make payments.

“I think that’s the risk we’re running at this late stage,” he said. “His 35 million borrowers, each with a different loan type and status, cannot be easily paid.”

US forgives some student loan debt for borrowers under $125,000

Source link US forgives some student loan debt for borrowers under $125,000

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