Biden Admin to Cancel $10,000 of Student Loan Debt for Millions, Despite Inflation Concerns
The Biden administration announced Wednesday that it will spend hundreds of billions of dollars to pay off at least $10,000 in federal student loan debt for each borrower, despite widespread worries that the move will worsen the inflation crisis.
Individuals earning less than $125,000 a year or families earning less than $250,000 will be eligible for up to $10,000 in debt cancellation, the Education Department said. Pell Grant recipients who met those income standards will be eligible for relief up to $20,000.
Pell Grants are typically awarded to students from low-income households to help them cover their college expenses.
Nearly 8 million borrowers may be eligible to receive relief automatically because the Department already has their relevant income information.
In addition, the freeze on student loan repayments and interest, which has been in place since March 2020, will be extended for a final time to the end of this year.
“In keeping with my campaign promise, my Administration is announcing a plan to give working and middle class families breathing room as they prepare to resume federal student loan payments in January 2023,” President Joe Biden wrote on Twitter.
Education Secretary Miguel Cardona echoed the president’s remark, saying that the student loan debt cancellation would help alleviate the financial burden that has hindered college-educated Americans from achieving their life goals.
“We’re delivering targeted relief that will help ensure borrowers are not placed in a worse position financially because of the pandemic, and restore trust in a system that should be creating opportunity, not a debt trap,” he said.
Wednesday’s decision comes after months of pressure from a vocal, progressive wing of Democrats calling on Biden to fulfill his campaign promise. While the Democrats insist that the cancellation will support Americans who struggle financially, the Republicans question whether it actually helps those most in need.
Citing a new analysis by the University of Penn Wharton, the House Republicans argued that forgiving federal student loan debt will not only cost $300 billion over the next decade, but also largely benefit higher income earners.
“Americans are already struggling under record-high inflation,” Republican members on the House Ways and Means Committee argued. “Forgiving $10,000 of student loan debt per person does nothing to bring down inflation, and will only exacerbate the rising cost of higher education rather than address it.”
The move is also almost certain to lead to a legal challenge over whether the president can bypass Congress to do so. In fact, House Speaker Nancy Pelosi (D-Calif.) said last July that Biden may pause or delay student loan payments, but can’t unilaterally cancel them.
“He can postpone, he can delay, but he does not have that power,” Pelosi said at that time. “That would best be an act of Congress.”