It used to be a pipe dream for borrowers. Student loan debt will be forgiven for federal borrowers who earn under $125,000 per year.
According to the Penn Wharton Budget Model, an estimated $300 billion worth of debt will be erased, and benefits will go to working- and middle-income households. The data from the U.S. Department of Education shows that one-third of borrowers will have their debt eliminated.
Up to $20,000 in debt will be erased for people who earn less than $125,000 a year. The benefits of the proposal for low-income borrowers were expanded by the fact that forgiveness was not part of the calculation.
Democrats have been pushing for student debt cancellation for years as a way to address ballooning balances, racial inequalities, and a debt load that has been found to affect the economic prospects of an entire generation. It wasn't until Biden won the election that it became a possibility.
Biden said he would announce more details on Wednesday.
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.
I'll have more details this afternoon. pic.twitter.com/kuZNqoMe4I
— President Biden (@POTUS) August 24, 2022
The administration has been slow to take action on Biden's campaign to cancel $10,000 in student loan debt for every person who owes it.
The student loan payment pause will be extended through the end of the year, according to Biden. Federal borrowers have not had to make a student loan payment in the last year.
According to the Government Accountability Office, the moratorium cost the federal government $102 billion in unmade interest payments.
More student loan debt was forgiven by Biden than any other president. Most of the debt was held by people who were cheated or already in a forgiveness program. Suzanne Kahn is the managing director of research and policy at the Roosevelt Institute.
Making higher education more equitable in the future is a win.
The debt of 2 million Black borrowers would be zeroed out with the cancellation of $10,000 of student debt. It's possible to close the racial wealth gap in the U.S. by giving debt away.
Critics of cancellation are plentiful. Republicans say people who need forgiveness the least benefit from forgiveness.
Biden isn't going far enough according to some Progressives. The NAACP wants $50,000 in student debt forgiveness, which they say would have a bigger impact on the student loan crisis.
The Committee for a Responsible Federal Budget estimates that it would take just four years for debt to return to its previous levels.
The Roosevelt Institute is hopeful that this is the beginning of repairing the broken higher education system.
It is a time to think about how we reform higher education because of the power of the cancellation. It's an admission that we've messed up.
The story is evolving. You can check back for more information.
Student loan forgiveness will affect you and your finances. If you want to be featured in a future article, please email reporterAlicia Adamczyk.
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