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Business News/ News / World/  Joe Biden may announce plan to cancel student loan debt today: Report
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Joe Biden may announce plan to cancel student loan debt today: Report

Biden is set to announce that he will forgive $10,000 in student loan debt for millions of borrowers who make less than $125,000 annually

US President Joe Biden is set to announce $10,000 federal student loan cancellation. (AP)Premium
US President Joe Biden is set to announce $10,000 federal student loan cancellation. (AP)

US President Joe Biden is set to announce that he will forgive $10,000 in student loan debt for millions of borrowers who make less than $125,000 annually. The president is expected to reveal his long-awaited decision after he returns to the White House from vacation in Rehoboth Beach, Delaware.

The Biden administration is also expected to include extending until January a moratorium on federal student loan payments – implemented during the coronavirus pandemic, which is set to expire in August.

Biden faces increasing pressure from progressive Democrats to cancel an even larger share of debt for Americans who took federal loans to pay for college.

The White House under Biden and former President Trump, extended the pause six times since March 2020, sometimes giving borrowers up to a month's notice on whether their bills would be due.

Trump's order temporarily stopped the accrual of interest on federal student loans, effectively putting $1.6 trillion in debt owed by some 40 million Americans on hold. Since Biden has taken office, his administration has greenlighted over $31 billion in student loan relief for hundreds of thousands of borrowers.

Earlier in April, the Biden administration issued a release announcing that it is taking steps to correct "historic failures" that have hamstrung some 46 million student loan borrowers in debt amounting to $1.75 trillion.

Progressives have batted away concerns debt forgiveness would fuel inflation.

“Canceling $10,000 in student debt is not the decisive factor in battling inflation," Rose Khattar, associate director of economic analysis at the Center for American Progress told Bloomberg news agency. “Instead, it is a critical step in helping millions of Americans and their families improve their immediate and future economic security."

Forgiving student loan debt will cost between $300 billion and $980 billion over 10 years, depending on the scope, Bloomberg reported.

Student loan relief would provide disproportionate benefits to working- and middle-class households, according to data in the analysis by the Penn Wharton Budget Model. The poorest fifth of Americans, earning less than about $29,000 per year, would get a much smaller boost, while the top 10% would be almost entirely excluded depending on how relief is designed.

If Biden forgives as much as $10,000 per borrower with a $125,000 income cap, those earning from $29,000 to $141,000 -- a group that excludes the bottom fifth and top fifth of earners -- would reap nearly three-quarters of the benefits. The middle 60% would get about 70% of the benefit from a plan that forgives up to $50,000 and lifts the income cap entirely.

While rich Americans are excluded if Biden imposes an income cap, the top 5% of earners -- making more than $321,699 per year -- would get 2.4% of the benefit with no cap and relief of up to $50,000.

(With agencies input)

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Published: 24 Aug 2022, 07:36 AM IST
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