On Wednesday, President Joe Biden announced the federal government will forgive $10,000 in student loan debt per borrower and up to $20,000 for those that received Pell Grants. The loan forgiveness is limited to those making less than $125,000 a year for individuals or $250,000 a year for households.
According to the White House, this action could wipe out debt entirely for nearly 20 million of the 43 million Americans who currently hold student loan debt.
Biden also announced that the moratorium on student loan repayments will continue until January 1, 2023. That will be the fifth pause of repayments since Biden took office and the eighth pause since the CARES Act passed in 2020. Payments were set to resume on September 1.
The administration further states that roughly 8 million borrowers will have their loans canceled automatically because the Department of Education has their income information on file. The White House says that an application will be released in the coming weeks, enabling other borrowers to apply for the loan forgiveness and to check if the Department of Education has their income information already.
The forgiveness is by far the largest yet by the Biden administration and adds to the billions of dollars in student debt that has already been canceled for disabled borrowers, public service workers, and borrowers who were defrauded by for-profit colleges.
While the announcement was praised by many on the left, it also received criticism for not going far enough. Many prominent Democrats, including Senate Majority Leader Chuck Schumer, asked the administration to forgive at least $50,000 worth of debt per borrower. Others, including Biden’s primary opponent Vermont Senator Bernie Sanders, demanded that Biden forgive all debt, a request he reiterated on Wednesday after the Biden administration’s announcement.
It also falls short of what Biden promised various times during the campaign. While Biden’s official campaign website was relatively modest in its claims about total student debt forgiveness, changing multiple times according to archive.org, then-candidate Biden did state in a medium post that he was developing a plan to “forgive all undergraduate tuition-related federal student debt from two- and four-year public colleges and universities for debt-holders earning up to $125,000,” which would also apply to private Historically Black College and Universities (HBCUs) and Minority-Serving Institutions (MSIs) in addition to the $10,000 student debt forgiveness he promised to “immediately” cancel once in office.
The plan to erase all undergraduate debt from public colleges and HBCUs and MSIs was repeated in the Biden-Sanders Unity Task Force, which was a document proposing an agenda aimed at unifying the progressive and moderate wings of the party after a contentious primary. The plan was then adopted as part of the official Democratic Party Platform at the Democratic National Convention in 2020. Biden also appeared to reference the plan during an October 2020 town hall meeting, weeks before being elected.
An image has been circulating on Twitter appearing to show the plan to forgive all student debt was on Biden’s campaign website at some point, but Sputnik was unable to independently verify that it was on Biden’s website.
However, Sputnik was able to verify that Biden’s campaign website did promise to eliminate tuition for two-year and four-year public colleges and universities for families with incomes below $125,000 and double the amount awarded by Pell Grants, as well as extend them to DREAMers and formerly incarcerated individuals.
While Wednesday’s announcement did not increase the maximum Pell Grant award or eliminate tuition, it did note that “the President will continue to fight to double the maximum Pell Grant and make community college free.”
In addition to loan forgiveness, the Department of Education is modifying the income-driven repayment plan. The plan will cap monthly payments for undergraduate loans at 5% of the borrower’s discretionary income, down from 10%. The announcement also stated that colleges will have “an obligation to keep prices reasonable” but did not specify tuition limits. It did note that the Department of Education is re-establishing the enforcement unit in the Office of Federal Student Aid.
The plan also raises the amount of income that is considered non-discretionary income. According to the announcement, no one who makes less than 225% of the official federal poverty level will have to make a monthly payment. It states that this is roughly the annual equivalent of someone making $15 an hour full time. The monthly interest will also be covered by the federal government, ensuring that student loans do not balloon due to slow payments.
Loan balances under $12,000 can also be forgiven for borrowers who have made payments for 10 years; it was previously 20 years. Many borrowers failed to take advantage of the program, due in part to poor bookkeeping from the Department of Education. A plan enacted by the Biden administration in April is designed to clean up the process.
The White House also noted that the debt relief will not be counted as taxable income and also announced further expansions to the Public Service Loan Forgiveness program, enabling more borrowers who worked in non-profits or for local, state, federal, or tribal governments for at least 10 years to have their loans forgiven.