WASHINGTON — President Joe Biden is expected to announce as early as Wednesday whether he should forgive $10,000 in student loan debt, according to sources familiar with the talks, such as the White House is approaching a self-imposed deadline for a last call.
After weighing the stock for months, the president is expected to reveal a decision after returning to the White House from a vacation in Rehoboth Beach, Del. Any action would likely include extending a moratorium on federal student loan payments that has been implemented during the coronavirus pandemic.
The president said he would make a decision by August 31. Biden is facing growing pressure from progressive Democrats to write off even more of the debt of Americans who have taken out federal loans to pay for their education. But some Democratic economists, including former Treasury Secretary Larry Summers, worry about the risk of debt cancellation pushing inflation to a 40-year high.
What the president plans
- The parameters are not yet clear. But the White House has focused on a plan that would forgive up to $10,000 in student loan debt per borrower, according to sources close to the talks, a figure Biden campaigned on.
- Debt forgiveness would be limited to borrowers with household incomes of $125,000 or less and would only apply to people with federal loans, not private ones.
- More than 43 million people have federal student loan debt in the United States, and the average borrower has about $37,000, according to data compiled by the Education Data Initiative. The outstanding federal loan balance is approximately $1.6 trillion.
Progressive Democrats pushed for even more
- Forgiveness of $10,000 in student loan debt could receive mixed reviews from progressive groups — including the NAACP, Congressional Black Caucus and labor unions — who have called for greater debt forgiveness. Some liberals have urged Biden to forgive all student loan debt. Top Democrats, including Majority Leader Chuck Schumer, DN.Y., and Sen. Elizabeth Warren, D-Mass., have pressured Biden to forgive at least $50,000 in student loan debt.
- “If student debt repayments can be put on hold again and again, there’s no reason the president can’t cancel a minimum of $50,000,” said NAACP youth director Wisdom Cole. and the university on canceling student debt. He called writing off at least $50,000 of student loan debt a “bottom line.”
- The income cap for eligibility – designed to prevent wealthy Americans from benefiting – is another point of contention for progressive activists, who say it would create a bureaucratic mess and prevent millions of borrowers from getting a loan. relief.
“The means test hoops mean millions and millions of borrowers will not get help,” said Melissa Bryne, executive director of We The 45 Million, which represents student borrowers advocating for the cancellation of student debt. She called it an “outrageous violation” of Biden’s campaign pledge to forgive student loan debt to all borrowers.
The risk of inflation weighs on the decision
- Biden said in April he was looking closely at executive action to write off federal student loan debt. Foremost among the White House’s considerations in the months that followed: the possible impact on inflation, which soared throughout the year.
- Canceling potentially up to $10,000 in student loan debt would mean billions more would collectively stay in Americans’ pockets. Some critics argue that the extra money consumers can spend risks fueling demand and further accelerating historic inflation.
- Summers, a former Clinton administration treasury secretary and economic adviser to Barack Obama, led warnings about the impact on inflation and said canceling student debt would disproportionately help top-earning Americans . Jason Furman, President Obama of the Council of Economic Advisers, raised similar concerns.
- “Student loan debt relief is an expense that increases demand and increases inflation,” Summers said in a tweet on Monday. “It consumes resources that could be better used to help those who, for whatever reason, have not had the chance to go to university. It will also tend to be inflationary by increasing tuition fees.
The impact for borrowers
- A Liberty Street Economics study found that forgiving $10,000 per borrower would wipe out $321 billion in student loan debt and completely wipe out the debt of about a third of borrowers, or about 12 million people.
- A separate study this week by the Wharton School at the University of Pennsylvania found that canceling $10,000 in federal student debt would cost the federal government between $300 billion and $980 billion over 10 years.
- The Biden administration has already erased about $32 billion in student debt for 1.6 million borrowers by expanding eligibility for pre-existing relief programs, such as the Civil Service Loan Forgiveness Program.
A midterm boost for Democrats?
Canceling some student loan debt – a hugely popular idea among young, left-leaning voters – could energize a key voting bloc that showed signs of lack of enthusiasm in November’s midterm elections.
A Harvard University poll found that 85% of Americans aged 18-29 said they support some form of government action on student debt, with 38% supporting full debt cancellation.
Planning their line of attack, Republicans criticized student debt cancellation as a ploy to reward the liberal and academic elite and punish those who could not afford college or had to save to pay off their debt. They also said it would accelerate inflation.
Senate Majority Whip John Thune, RS.D., said canceling student debt would create “gross injustice for people who have already paid off their student loans or never gone to school.” university” and would further harm “our inflation-ridden economy.
Contact Joey Garrison on Twitter @joeygarrison.