Watch live: Biden announces student loan relief plan, writing off up to $20,000 in debt for millions

Washington – President Biden said 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 will be eligible for loan forgiveness of up to $10,000. Recipients of Pell grants, which are awarded to students with the greatest financial need, are eligible for another $10,000 relief.

Loan repayments will also be capped at 5% of monthly income. Current students will also be eligible for debt relief, although prospective students will not, according to senior administration officials who explained details of the plan during a call with reporters.

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 pandemic-era hiatus will be extended.

Mr. Biden is due to deliver a speech at the White House at 2:15 p.m.

“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 Department of Education said nearly 8 million borrowers will have their debt automatically forgiven, while others will need to seek relief. The app for borrowers seeking debt relief will be unveiled “in the coming weeks,” the department said, adding that borrowers can sign up to be notified when the app becomes available.

The income caps will be based on 2020 or 2021 income. If an individual or couple’s income was below the cap in either year, they will be eligible, said a senior administrative official.

Tens of millions of borrowers are expected to receive 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. $.

The decision to cancel student debt follows months of internal White House deliberations over the feasibility and cost of the operation. 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.

In anticipation of the court battles ahead, the Department of Education released a memo from General Counsel Lisa Brown with a legal rationale for Mr Biden’s actions. Brown cited a 2003 law known as the HEROES Act, which she said gives the secretary of education broad authority over student aid programs during a time of national emergency.

“Under current circumstances, this authority could be used to implement a categorical debt cancellation program aimed at addressing the financial damage caused by the COVID-19 pandemic,” Brown wrote. “The Secretary may waive or modify statutory and regulatory provisions to effect a certain amount of forgiveness for borrowers who have been financially harmed due to the COVID19 pandemic.”

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.

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.

Senior administration officials on the call with reporters argued that any impact on inflation by canceling student debt would be “largely offset” by the resumption of student loan repayments.

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. With interest rates set at zero, the pause saved federal borrowers more than $1.5 billion each month, according to an April report from the Financial Health Network.

Steven Portnoy and Kristin Brown contributed to this report.


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