Biden administration unveils sweeping student loan forgiveness plan
The Biden administration uveiled historic plans on Aug. 24 to forgive some federal student debt for millions of borrowers. Source: "All Staff Zoom Call with Vice President Biden..." - Wilmington, DE - August 13, 2020" by Biden For President is licensed under CC BY-NC-SA 2.0.
On August 24, President Biden unveiled his much-anticipated plan to forgive or reduce student debt for millions of American borrowers, fulfilling a central campaign pledge with his historic measures to tackle the growing student debt crisis.
The Biden administration announced they will forgive $10,000 in federal student loan debt per borrower earning less than $125,000 annually, and $20,000 for borrowers who received Pell Grants. This will completely wipe the federal student debt for nearly 20 million borrowers, according to Biden.
"Education is a ticket to a better life. ... but over time that ticket has become too expensive for too many Americans," Biden said during the announcement speech from the White House. "All this means that an entire generation is now saddled with unsustainable debt in exchange for an attempt, at least, at a college degree. 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 sweeping plan applies to both undergraduate and graduate debt and focuses on relief for low- and middle-income individuals. Biden said that the administration's "targeted actions are for families that need it the most: working and middle class people hit especially hard during the pandemic making under $125,000 a year," underscoring that "about 90% of the eligible beneficiaries make under $75,000."
In the days following the announcement, Department of Education officials and other experts have pointed out the several notable exceptions in Biden’s forgiveness plan. First, all private student loans are excluded from the president’s plan; though, the vast majority — roughly 37 million borrowers— will be eligible for forgiveness. Only loans disbursed by June 30 of this year are eligible for relief.
Current students with loans are eligible for this debt relief. Borrowers who filed their federal student aid application as dependent students will be eligible for relief based on their parent’s income, rather than their own income.
Most borrowers will need to apply for debt relief using an application that is expected to be ready in early October, though nearly 8 million borrowers may be eligible to receive relief automatically because relevant income data is already available to the Department of Education.
Borrowers who provide an email address at studentaid.gov will receive an email notification when the application is available. Applications can take four to six weeks to process and borrowers will have more than a year to apply once the application is available.
The administration will also extend the current student loan moratorium for another three months until the end of the year. While borrowers have had a pause on repayment since March 2020, they will resume payments in January 2023. This marks the seventh and likely final extension of the pandemic-era relief policy started under the Trump administration.
Along with the announcement that the administration will be forgiving federal student debt, Biden also provided details on his proposals make repayment more manageable for borrowers. The Department of Education is proposing a new income-driven repayment plan, which includes provisions to cut in half the amount borrowers have to pay per month from 10% to 5% of discretionary income.
Biden’s action, while fulfilling a core campaign promise to aid graduates who have struggled with loan repayment, also carries a steep cost — estimated to be between $300 billion and $500 billion. As the administration utilized emergency executive powers to institute the sweeping plan, bypassing the legislature, they are poised to face a number of serious legal challenges and some GOP leaders have warned borrowers not to “celebrate prematurely”
As of September 13, nearly half of U.S. governors have signed off on a letter asking the president to withdraw his loan forgiveness plan, citing concerns that the action may increase inflation or drive up costs of higher education. They also underscored the unfair burden the costly plan may place on American taxpayers, especially those who didn’t attend college or already paid off their loans. The 22 governors — all Republicans — also challenged Biden’s power to enact the plan, arguing he “lack[s] the authority to wield unilateral action to usher in a sweeping student loan cancellation plan."
The administration has consistently refuted similar claims that the plan will hurt taxpayers, noting that loan forgiveness will ultimately benefit the economy through supporting those facing mounting debt.
"I understand not everything I'm announcing is going to make everybody happy," Biden said. "Some think it's too much -- I find it interesting how some of my Republican friends who voted for those tax cuts think we shouldn't be helping these folks. Some think it's too little, but I believe my plan is responsible and fair. It focuses the benefit of middle-class and working families, it helps both current and future borrowers and it'll fix a badly broken system."