Millions of Americans who make less than $125,000 annually will get up to $10,000 (£8,474) in federal student loan cancellations from US President Joe Biden. increaseitionally, Biden will waive $20,000 in debt for Pell Grant recipients, who are those with the greatest need.
He said, “they can crawl out from beneath that debt mountain.” Federal student debt is owed by 43 million Americans, who collectively owe $1.6 trillion. Nearly one-fifth owe less than $10,000.
A final extension will be made to the temporary student loan suspension, which was first implemented in March 2020, through the end of this year.
Speaking from the White House on Wednesday, Mr. Biden said his approach would provide working and middle class Americans more “breathing room.”
“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,” he said, recalling the shame his car salesman father felt when he struggled to pay for his children’s education.
As per Biden, one-third of debtors have student debt but no degree. The worst of both situations
The statement comes after an extended period of heated internal debate within the White House and increasing pressure from progressive Democrats. Senators Elizabeth Warren of Massachusetts and Chuck Schumer of New York, both prominent Democrats, were among those who urged Mr. Biden to utilise his unilateral authority to cancel borrower loans.
The $50,000 per borrower plan that Mr. Schumer and Ms. Warren requested is less than Wednesday’s proposal.
As per an estimate from the Penn Wharton budget model at the University of Pennsylvania, a one-time cancellation of $10,000 for each borrower earning a maximum of $125,000 will cost the federal government about $300 billion.
On Wednesday, Mr. Biden responded to this criticism by arguing that his student loan forgiveness plan is the “economically responsible course”.
“I will never apologise for helping working Americans and the middle class,” he said, adding that “no high-income individual or high-income household will benefit from this action”.
Inflation will increase as a result of debt elimination, according to Republicans and some moderate Democrats. Others contend that a generalised debt forgiveness programme is unjust to borrowers who have already repaid their school debts.
House minority leader Kevin McCarthy, a Republican from California, quickly criticised the plan on Twitter: “Who will have to pay for Biden’s debt transfer scam? Hard-working Americans who already paid off their debts or never took on student loan debt in the first place,” he wrote.
As reported by the BBC, Democratic legislators objected, arguing that eliminating student loans would help reduce economic inequalities across races.
Compared to other Americans, black students are more likely to borrow federal student loans and at higher rates. As per a Brookings Institution study, black borrowers owe, on average, over $25,000 more than their white counterparts four years after receiving bachelor’s degrees.