Biden Announces Long-awaited Student Debt Forgiveness Plan | Business news

WASHINGTON (AP) — President Joe Biden on Wednesday announced his long-awaited plan to fulfill his campaign promise to pay off $10,000 in debt for millions of Americans — and up to $10,000 more for those in greatest financial need.

Borrowers making less than $125,000 a year or families making less than $250,000 will be eligible for $10,000 in loan forgiveness, Biden announced on Twitter. For Pell Grant recipients, which are designed for students with the most significant financial need, the federal government will cancel up to $10,000 of additional federal loan debt.

Biden is also extending a pause in federal student loan payments for what he called “the last time” until the end of 2022. He was scheduled to give a speech Wednesday afternoon at the White House to present his proposal to the public.

If his plan survives the legal challenges it almost certainly faces, it could provide a windfall for the nation’s masses ahead of this fall’s midterm elections. According to federal data, more than 43 million people have federal student debt, with an average balance of $37,667. Nearly a third of borrowers owe less than $10,000, and about half owe less than $20,000. The White House estimates that Biden’s announcement will wipe out about 20 million people’s federal student debt.

Proponents argue that repeal would reduce the racial wealth gap — black students take out federal student loans more often and for higher amounts than others. According to data A study by the Brookings Institution.

Still, the move is unlikely to impress any of the factions jockeying for influence as Biden weighs how much to repeal and for whom.

Biden faced pressure from liberals to provide broader relief to borrowers hit by moderates and Republicans who question the fairness of any broad forgiveness. The delaying Biden’s decision has only heightened expectations of what his own aides admit is a political win-win situation. The people spoke on condition of anonymity to discuss Biden’s anticipated announcement ahead of time.

Continuation Freezing payments during the coronavirus pandemic comes just days before millions of Americans were to find out when their next student loan payment was due. This is the closest the administration has come to ending an extension of the payment freeze, with the current pause set to expire on August 31.

Details of the plan have been closely guarded while Biden weighs his options. On Wednesday, the administration said the Department of Education would do so release information in the coming weeks for eligible borrowers to sign up for debt relief. The cancellation will be automatic for some if the department has access to their income information, but others will need to fill out a form.

Current students would only be eligible for aid if their loans were taken out by July 1, 2022. Biden is also going to propose capping the amount borrowers pay each month on student loans at 5% of their earnings.

During the 2020 presidential campaign, Biden was initially skeptical of student loan debt cancellation when he faced more progressive candidates democratic nomination. Sens. Elizabeth Warren, D-Mass., and Bernie Sanders, R-Vit., have proposed a repeal of $50,000 or more.

As he tried to win support among young voters and prepare for a general election battle against President Donald Trump, Biden unveiled his initial proposal to cancel the $10,000 debt per borrower without mentioning the income limit.

In recent months, Biden scaled back his campaign promise to impose an income cap as soaring inflation took a political toll and as he sought to fend off political attacks that the repeal would benefit higher earners. But Democrats, from members of Congress to those facing hard-line candidates for re-election this November, have pushed the administration for the broadest possible debt relief, seeing it in part as a stimulus issue, especially for black and younger voters this fall.

Democrats are betting that Biden, whose approval rating has plummeted over the past year, can help motivate younger voters to the polls with the announcement.

While Biden’s plan has changed from what he originally proposed on the campaign trail, “he’s going to get a lot of credit for doing what he was committed to,” said Celinda Lake, a Democratic pollster who worked with Biden during the campaign. 2020 elections.

A survey of 18- to 29-year-olds by the Harvard Institute of Politics in March found that 59% of respondents favored some form of debt relief — whether for all borrowers or those with the greatest need — though student loans not included in the ranking leads among the issues that most concern people of this age group.

Some supporters say Biden’s plan still isn’t coming to fruition.

“If the rumors are true, we have a problem,” Derrick Johnson, president of the NAACP, which has aggressively lobbied Biden to take bolder action, said Tuesday.

“President Biden’s decision on student debt cannot be the last example of policies that have left black people — especially black women — behind,” he said. “This is not how you treat black voters who came out in record numbers and cast 90% of their votes to save democracy again in 2020.”

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

“We are talking about trust in politics, in the government, in our system. It’s also about trust in a person, which in this case is President Biden,” Della Volpe said.

Republicans, meanwhile, see a political benefit from Biden pushing for massive student debt cancellation ahead of November’s midterm elections, anticipating a backlash for Democrats — especially in states with large numbers of working-class voters without a college degree. Critics of sweeping student debt forgiveness also say it would open the White House to lawsuits on the grounds that Congress never gave the president clear authority to cancel the debt on his own.

The Republican National Committee on Tuesday called Biden’s expected announcement a “handout to the rich,” arguing it would unfairly burden low-income taxpayers and those who have already paid off their student loans by covering higher education costs for the wealthy.

Biden’s lengthy deliberations led to grumbling among federal loan officers, who were tasked with holding back the accounts while Biden weighed the decision.

Industry groups complained that the delayed decision left them just days to notify borrowers, retrain customer service staff and update websites and digital payment systems, said Scott Buchanan, executive director of the Student Loan Service Alliance.

That increases the risk that some borrowers will be inadvertently told they need to make payments, he said.

“I think we’re taking a risk at this late stage,” he said. “You can’t just turn on a dime with 35 million borrowers who have different loan types and statuses.”

AP writer Michael Balsama contributed to this report.

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