Biden Will Cancel $10,000 in Student Loan Debt for Borrowers Earning Less than $125,000 per Year

Daniella Cressman

Many have been eagerly awaiting President Joe Biden's decision on student loan forgiveness, and he has finally made his plan known: $10,000 in student loan debt will be canceled for borrowers earning less than $125,000 per year.

"President Biden announced on Wednesday that he would cancel $10,000 in student loan debt for Americans earning less than $125,000 per year, capping months of anticipation over a campaign promise to provide economic relief to millions of people, according to four people familiar with the announcement." —Zolan Kanno-Youngs, Stacey Kowley, and Jim Tankersly

In addition, President Biden extended the pandemic-era pause on loan payments until the end of this year.

"Mr. Biden also extended a pandemic-era pause on loan payments until the end of the year. It has been in effect since March 2020." —Zolan Kanno-Youngs, Stacey Kowley, and Jim Tankersly

The President also announced that those with undergraduate loans will be able to cap their payments at 5% of their monthly income—This change could significantly reduce bills for millions of borrowers.

"Mr. Biden also said those with undergraduate loans would be able to cap their payments at 5 percent of their monthly income, a change that could significantly reduce bills for millions of borrowers. The government’s current income-driven plans generally cap payments at 10 percent of a borrower’s discretionary income." —Zolan Kanno-Youngs, Stacey Kowley, and Jim Tankersly

Unfortunately, the timing of this relief is uncertain: many are concerned that it will exacerbate inflation before the midterm elections and Mr. Biden's plan will likely face some legal challenges.

"The debt forgiveness, although far less than the amount that some Democrats had been pushing for, comes after months of deliberations in the White House over fairness and fears that it could exacerbate inflation before the midterm elections. The plan will almost certainly face legal challenges, making the timing of any relief uncertain." —Zolan Kanno-Youngs, Stacey Kowley, and Jim Tankersly

Many Americans are in favor of President Biden's plan, saying that it will likely address the economic racial disparities in the United States and help nearly 45 million people pay off their debts.

On the other hand, opponents argue that widespread debt forgiveness is deeply unfair to those who paid for their college education out of their own pocket, working long hours to earn their degrees.

Additionally, Republicans—as well as some Democrats—argue that President Biden's plan would put more spending money in the hands of consumers, which could heighten inflation even further!

"Across the United States, 45 million people owe $1.6 trillion for federal loans taken out for college — more than they owe on car loans, credit cards or any consumer debt other than mortgages. Many Democrats have argued that debt forgiveness is necessary to address racial disparities in the economy. But critics say widespread debt forgiveness is unfair to those who tightened their belts to pay for college, and Republicans and some Democrats contend that it will add to inflation by giving consumers more money to spend." —Zolan Kanno-Youngs, Stacey Kowley, and Jim Tankersly

In an effort to address these concerns—at least partially—the White House will provide targeted relief directed solely at earners in a specific income range.

"The White House sought to address those economic concerns by targeting relief, which will be available only to borrowers earning less than $125,000 a year or households earning less than $250,000. The administration contends that 90 percent of the relief will go to households earning $75,000 a year or less." —Zolan Kanno-Youngs, Stacey Kowley, and Jim Tankersly

Students who received Pell grants will be eligible for an additional $10,000 of debt forgiveness.

"Students who received Pell grants, which are for low-income students, will be eligible for an additional $10,000 in debt forgiveness." —Zolan Kanno-Youngs, Stacey Kowley, and Jim Tankersly

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Canadian-American author writing about local politics, personal finance, & dining in Albuquerque.

Albuquerque, NM
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