Biden set to cancel $10,000 in student loan debt for millions of Americans

Millions of Americans were on Wednesday expected to learn the fate of their federal student debt as Joe Biden was due to deliver on his campaign promise to provide $10,000 in debt cancellation for many borrowers.

The US president was scheduled later on Wednesday to outline his student debt relief measures, but meanwhile he tweeted the basics of his proposal.

Borrowers who earn less than $125,000 a year would be eligible for the loan forgiveness and borrowers whose low-income level qualified them for a type of federal student grant called the Pell Grant, will receive up to $20,000 in relief. About a third of undergraduate students receive Pell Grants.

Biden was also set to extend a pause on federal student loan payments through January.

If it survives probable legal challenges, Biden’s plan could offer a windfall to a swath of the nation in the run-up to this fall’s midterm elections. More than 45 million owe a combined $1.7tn in federal student debt, with almost a third owing less than $10,000, according to federal data.

The US has a decades-long history of student debt, the vast majority of which is owed to the federal government, which has been offering student loans for college since 1958. The amount of student debt has more than tripled over the last 16 years.

Some of Biden’s senior allies on Capitol Hill cheered his announcement, with the US Senate’s top Democrat, Chuck Schumer, and Massachusetts senator Elizabeth Warren, a longtime advocate of the policy in the chamber, issuing a joint statement.

“With the flick of a pen, President Biden has taken a giant step forward in addressing the student debt crisis by cancelling significant amounts of student debt for millions of borrowers. The positive impacts of this move will be felt by families across the country, particularly in minority communities, and is the single most effective action that the president can take on his own to help working families and the economy,” the statement said, in part.

It also added that Democrats in Washington would continue with efforts “to help close the racial wealth gap for borrowers and keep our economy growing”.

Biden has faced pressure from liberals to provide broader relief.

The cancellation falls short of the $50,000 many student debt activist groups were asking Biden to forgive. Some groups have been calling on Biden to enact full student debt cancellation.

“If we can cancel $10k, we can cancel it all,” the Debt Collective, a union of debtors, tweeted on Wednesday.

But, calling it socialism, the top Senate Republican, Mitch McConnell, blasted the administration’s debt relief proposal and argued that it will worsen inflation, while administration officials briefed that it could reduce inflation.

McConnell said: “Biden’s student loan socialism is a slap in the face to every family who sacrificed to save for college, every graduate who paid their debt, and every American who chose a certain career path or volunteered to serve in our armed forces in order to avoid taking on debt. This policy is astonishingly unfair.”

The delay in Biden’s announcement has only heightened the anticipation for what his own aides acknowledge represents a political no-win situation. The people spoke on the condition of anonymity to discuss Biden’s intended announcement ahead of time.

The expected continuation of the coronavirus pandemic-era payment freeze came just days before millions of Americans were set to find out when their next student loan bills will be due. The government was close to hitting the end of the payment freeze extension, with the current pause set to end on 31 August.

During the 2020 presidential campaign, Biden was initially skeptical of student loan debt cancellation as he faced off against more progressive candidates for the Democratic nomination, such as Warren and the democratic socialist Bernie Sanders .

As he tried to shore up support among younger voters and prepare for a general election battle against Donald Trump, Biden unveiled his initial proposal for debt cancellation of $10,000 per borrower, with no mention of an income cap.

Biden narrowed his campaign promise in recent months by embracing the income limit as soaring inflation took a political toll.

Democrats, from members of congressional leadership to those facing tough re-election bids this November, have pushed the administration to go as broad as possible on debt relief, seeing it as a galvanizing issue, particularly for Black and young voters.

‘There’s been a dramatic shift in how Americans think about the role of government in helping people out for college,” said Brian Powell, professor of sociology at Indiana University Bloomington who co-authored a book on the student loan crisis.

Powell noted that support for debt cancellation and college affordability has grown. Those who go to college make on average $30,000 more a year than those with just a high school degree.