President Biden fulfilled a campaign promise on Wednesday, when he said he would cancel student debt for Americans making under $125,000 a year.
In March 2020 Biden wrote that his economic recovery plan would include an immediate cancellation of a minimum of $10,000 of student debt. The White House denied a Washington Post report that it was going to cancel debt for Americans making less than $150,000.
According to the details of the plan released by the administration, borrowers will have to pay no more than 5% of their discretionary income monthly. After 10 years of payment, loan balances will be forgiven for those with balances of $12,000 or less, down from 20 years. Households earning less than $250,000 will be eligible.
There will be an additional $10,000 in forgiveness for people who make less than $125,000. The student debt moratorium will be extended through the end of the year, according to Biden. The current pause was put in place at the start of the Pandemic.
The progressive wing of the Democratic Party, as well as Senate Majority Leader Chuck Schumer and Sen. Raphael Warnock, D-GA, were pushing for Biden to forgive $50,000 per loan. The White House has promoted its efforts to help with student loan debt through its work with the Public Service Loan Forgiveness and Income-driven Repayment programs.
According to an April report from the Federal Reserve Bank of New York, theforgiveness of $10,000 per borrower would forgive a total of $321 billion of federal student loans. Because of this, low-income Americans who do not file taxes but still have student loan debt, as well as creating potential issues with the Education Department, could be excluded.
The move is seen as an attempt to earn the support of young voters, with whom Biden saw his approval rating plummet earlier this year, particularly those who are Black and Hispanic. The president has been urged to take action on student loans by many Democrats. In April, Elizabeth Warren wrote in the New York Times about the issue of student loan debt cancellation.
It would lift the economic outlook for too many borrowers who still weren't able to get a college degree, for the millions of female borrowers who shoulder about two-thirds of all student loan debt, and for Black and Hispanic borrowers. The president could close gender and racial wealth gaps with a pen.
Warren said that Democrats cannot bow to the advice of out-of-touch consultants. We will not be in the majority much longer if Democrats don't deliver more of the president's agenda.
The plan has faced opposition from Republicans who said it was unfair to those who paid off their loans and that it could be dangerous to inflation. The plan was attacked by the RNC as a handout to the rich.
Some on the left felt that the proposal was not enough. The $10,000 proposal was criticized by the president of the NAACP.
Johnson wrote in an article for CNN that they were fed up. A minimum of $50,000 in student loan debt cancellation has been called for by the NAACP. The goal should be to give the most relief to the borrowers with the highest amount of debt.
Johnson said in May that it was like pouring a bucket of ice water on a forest fire to cancel student loan debt. After the last extension of the pause on student loan payment collections in April, Johnson issued a statement saying, "This is an economic justice issue, it is a moral issue." One of the best ways to reduce the racial wealth gap is to cancel $50,000.
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