Biden cancels $10K in student debt for those making $125K or less; loan repayments won’t resume until January 2023

WASHINGTON — President Biden on Wednesday announced his long-awaited plan to deliver on a campaign promise to provide $10,000 in student debt cancellation for millions of Americans — and $10,000 more for those with the greatest financial need.

“People can finally crawl out from under that mountain of debt,” Biden said. “The whole economy will be better off.”

The president also extended the freeze on student loan repayments till Jan. 1, but said they would resume after that.

Pushing back on claims the debt forgiveness plan is economically rash, Biden portrayed the two actions as inextricably linked and tied them to the COVID pandemic recovery

“My plan is both responsible and fair,” Biden said. “It focuses aid on those working- and middle-class people who need it the most.

President Biden speaks about student loan debt forgiveness in the Roosevelt Room of the White House, Wednesday, Aug. 24, 2022, in Washington. (Evan Vucci/)

Biden said borrowers who earn less than $125,000 a year, or families earning less than $250,000, would be eligible for the $10,000 loan forgiveness.

For recipients of Pell grants, which are reserved for undergraduates with the most significant financial need, the federal government would cancel up to an additional $10,000 in federal loan debt, for a total of $20,000.

If his plan survives legal challenges that are almost certain to come, it could offer a windfall to a swath of the nation in the runup to this fall’s midterm elections.

More than 43 million people have federal student debt, with a total debt of about $1.7 trillion, according to federal data.

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 would erase the federal student debt of about 20 million people.

Proponents say cancellation will narrow the racial wealth gap — Black students are more likely to borrow federal student loans and at higher amounts than others. According to a Brookings Institution study, Black borrowers owe an average of nearly $25,000 more than their white peers four years after earning bachelor’s degrees.

Still, the action is unlikely to thrill any of the factions that have been jostling for influence as Biden weighs how much to cancel and for whom.

President Biden speaks about student loan debt forgiveness in the Roosevelt Room of the White House, Wednesday, Aug. 24, 2022, in Washington. Education Secretary Miguel Cardona listens at right. (Evan Vucci/)

Biden has faced pressure from liberals to provide broader relief to hard-hit borrowers, and from moderates and Republicans questioning the fairness of any widespread forgiveness. The delay in Biden’s decision 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 White House emphasized that no one in the top 5% of income would see any loan relief.

The continuation of the coronavirus pandemic-era payment freeze comes just days before millions of Americans were set to find out when their next student loan bills will be due. This is the closest the administration has come to hitting the end of the payment freeze extension, with the current pause set to end Aug. 31.

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

FILE - Confetti drops on graduates as they celebrate during a graduation ceremony for New York University at Yankee Stadium in New York, on May 18, 2022. (Seth Wenig/)

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. Sens. Elizabeth Warren (D-Mass.) and Bernie Sanders (I-Vt.) had proposed cancellations of $50,000 or more.

“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,” said Warren on Wednesday in a joint statement with Senate Majority Leader Chuck Schumer.

U.S. Senate Majority leader Chuck Schumer speaks at a press conference about a plan to relieve debt for federal student loan borrowers Friday, April 16, 2021 in Manhattan. (Barry Williams/)

A survey of 18- to 29-year-olds conducted by the Harvard Institute of Politics in March found that 59% of those polled favored debt cancellation of some sort — whether for all borrowers or those most in need — although student loans did not rank high among issues that most concerned people in that age group.

Some advocates say Biden’s plan still falls short.

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

“President Biden’s decision on student debt cannot become the latest example of a policy that has left Black people — especially Black women — behind,” he said. “This is not how you treat Black voters who turned out in record numbers and provided 90% of their vote to once again save democracy in 2020.”

Activists attend a rally outside of the White House to call on U.S. President Joe Biden to cancel student debt on July 27, 2022 in Washington, DC. (Anna Moneymaker/)