Biden writes off $10,000 in mostly student loan debt, extending payment pause

Washington – President Biden announced on Wednesday that he was forgiving up to $10,000 in federal student debt for millions of Americans and an additional $10,000 for low-income borrowers while extending a pause on monthly payments, delivering long-awaited relief just weeks before the midterm elections.

As part of the plan, which the President unveiled on Twitter, borrowers earning less than $125,000 per year or couples earning less than $250,000 per year would be eligible for loan forgiveness of up to $10,000. Recipients of Pell grants, which are awarded to students with the greatest financial need, would be eligible for an additional $10,000 in aid. Loan repayments will also be capped at 5% of monthly income.

The president is also postponing student loan repayments until the end of the year, and the Department of Education has said that will be the last time the break will be extended. Mr. Biden is scheduled to deliver a speech on Wednesday afternoon, the White House said.

“As per my campaign promise, my administration is announcing a plan to give working and middle class families a break as they prepare to resume federal student loan repayments in January 2023,” the president tweeted.

The decision to cancel student debt follows months of internal deliberations over the legality and cost of doing so. Mr. Biden has made canceling student loans one of his top priorities during his presidential campaign, and Democrats have been pushing the administration to keep his promise. Republicans have said Mr Biden lacks the power to cancel the debt and his plan is certain to face a barrage of legal challenges.

An analysis of Penn Wharton’s budget model concluded that forgiveness of $10,000 in student loan debt for those earning up to $125,000 a year would cost nearly $300 billion in the first year. It also found that more than two-thirds of debt cancellation would help Americans in the top 60% earners.

Millions of borrowers are expected to be eligible for relief under the plan. While more than 43 million borrowers have federal student loan debt, according to Department of Education data, the Federal Reserve says the majority have less than $25,000 in debt and a quarter owe less than $10,000. $.

Low-income Americans who have never attended college and are struggling financially amid record inflation would not benefit from any debt forgiveness, critics of student debt forgiveness point out. Nor would wiping out some student loan debt solve the rising cost of a college education, which has historically outpaced inflation in recent decades.

The pause in student loan repayments began under the Trump administration at the start of the pandemic, and Mr Biden has suspended student loan repayments a total of four times since taking office. The current pause ends after August 31, after which borrowers would have to start paying their debt again if there is not another extension.

Steven Portnoy and Kristin Brown contributed to this report.

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