President Joe Biden announced a sweeping package of student-debt relief that forgives as much as $20,000 in loans for some recipients, a move he said would help a generation "saddled with unsustainable debt."
"The burden is so heavy that even if you graduate you may not have access to middle-class life that the college degree once provided," Biden said Wednesday at the White House.
"I made a commitment that we would provide student debt relief. And I'm honoring that commitment today," he added.
Biden also announced a four-month extension of the moratorium on student loan repayments, as well as plans to allow borrowers with undergraduate loans to cap repayments at 5% of their monthly income.
Taken together, the measures seek to make good on a Biden campaign promise and to curry favor with younger and progressive voters, whose support could help Democrats hoping to stave off a loss of their slim House and Senate majorities.
The announcement caps a good month for Biden which saw the passage of a massive Democratic climate, health care, and tax package, signs that inflation may be beginning to moderate, and the unemployment rate falling to pre-pandemic lows.
Democrats are hopeful the assistance on student loans as well as the Supreme Court decision overturning the right to an abortion nationwide will push voters to the polls.
Biden had been under pressure from progressive lawmakers, civil rights groups and labor leaders to forgive higher debt-loads, arguing they are disproportionately carried by Black or lower-income students. While the final plan falls short of those expectations, most advocates praised the president's moves.
The $20,000 in debt forgiveness will apply to loans for those who also receive Pell grants. For most student-loan holders, the limit will be $10,000. That figure — paired with a $125,000 income cap for individuals and $250,000 for households — is in line with a level Biden has been weighing for several months.
Proposed New Rule
The Biden Administration will also propose a new rule capping borrowers from paying more than 5% of their monthly discretionary income on undergraduate federal loans — down from 10% today.
The proposed rule also says that borrowers who make less than 225% of the federal minimum wage — roughly $30,577, or what a full-time worker earning $15 per hour earns — are not required to make payments on their federal undergraduate loans, according to the Department of Education.
The rule calls for the government to forgive loan balances of $12,000 or less after a borrower has made 10 years of payments. Currently, borrowers must pay their loans for two decades and have a balance below that amount to have debt forgiven.
The proposal also would restrict unpaid monthly interest from accruing as long as borrowers are making payments, so those who are benefiting from capped loan payments won't see their overall balances grow.
Although they'd pushed for a higher per-borrower debt relief figure, progressives lawmakers hailed the forgiveness of $20,000 for Pell grant recipients as a major win. Broader loan cancellation amounts for low-income people had been a major goal.
"With the flick of a pen, President Biden has taken a giant step forward in addressing the student debt crisis by cancelling significant amounts of student debt for millions of borrowers," Senator Elizabeth Warren and Senate Majority Leader Chuck Schumer said in a joint statement.
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
Calls for Reform
Other advocates, while celebrating the news, noted that it won't affect all borrowers.
"While this announcement is a major win for many, it is important to stress that $10,000 will leave many others still crushed by debt, and important details will determine who has access to much-needed relief," said Natalia Abrams, president and founder of Student Debt Crisis Center.
