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President Joe Biden announced Wednesday that he would cancel up to $10,000 in student debt for all Americans earning less than $125,000 annually. Additionally, he extended until 2023 the pandemic freeze on payments on this type of debt.
“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,” the president stated on Twitter.
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
Biden also promised to cap student loan payments at no more than 5% of a graduate’s monthly income. Current government repayment plans are capped at no more than 10% of debtors’ income.
The student debt forgiveness comes amid the mid-term elections when the Democrats are in a tight contest with the GOP for the majority of seats in Congress.
In the US, about 45 million people owe as much as $1.6 trillion in federal student loans. The average American their student debt is between $20,000 and $25,000.
The forgiveness will be targeted at people with incomes below $125,000 and households with an income below $250,000. The Biden administration claims that 90% of the relief will go to households earning less than $75,000 a year. Low-income students receiving Pell Grants will be eligible for an additional $10,000 in debt forgiveness.
Student debt forgiveness by Democrats will cost American taxpayers an estimated $300 billion, although the GOP argues that the actual figure could be as high as $400 billion.
One in five people who take on student debt default on their payments. With the pandemic, as many as 8 million people defaulted on their student debt at some point.
The average income of a college graduate exceeds $50,000 a year; in the US, a person is below the poverty line if they have an income of less than $12,490 a year. Biden’s executive order disproportionately benefits the middle and upper classes over lower-income people.
Despite the cost of the Democratic administration’s executive order, the amount to be forgiven is far less than the figure several progressive lawmakers were proposing, which amounted to $50,000 in debt per person. Concerns by Senators Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ) about the inflation that the new government spending would bring forced progressives to temper their aspirations to give subsidies to the middle and upper classes.
According to The New York Times, some White House insiders questioned whether President Biden had the legal authority to enact the student debt cancellation.
Economist, writer and liberal. With a focus on finance, the war on drugs, history, and geopolitics // Economista, escritor y liberal. Con enfoque en finanzas, guerra contra las drogas, historia y geopolítica