WASHINGTON - President Joe Biden is expected to announce that student loan debt up to $10,000 will be forgiven for millions of borrowers who qualify, according to sources familiar with the plan.
The long-anticipated move is expected to be accompanied by an extension until January of the federal student loan payment pause, which has been in place since March 2020 and was set to expire Aug. 31.
Here's what we know:
How many Americans hold student loan debt? Roughly 43 million Americans hold federal student loan debt to the tune of $1.6 trillion, according to recent federal data. Biden's move is expected to have an income cap of $125,000.
Biden campaign promise: The action would fulfill a campaign promise. Advocates for widespread debt relief had grown impatient with the president’s inaction, and some had started to question if debt relief would materialize.
Awaiting word: The White House has not yet confirmed the Wednesday announcement, first reported by the Associated Press.
An unprecedented move
The mass cancellation of student loans would be unprecedented in the nation's history of student borrowing — but there has been little precedent in the student loan landscape for more than two and a half years.
At the onset of the coronavirus pandemic, then-President Donald Trump paused student loan payments, set interest rates at zero percent and stopped collection attempts on overdue debts. Both Trump and Biden extended the moratorium multiple times. The most recent extension was April 6, less than 30 days before payments had been scheduled to start in May. It was set to expire Aug. 31, with some borrowers getting notices that were later retracted about payments resuming Sep. 1.
One thing weighing on the administration is the effect of loan forgiveness on inflation. Democratic economist Larry Summers this week repeated his warnings that erasing student loan debt will make inflation worse.
AMERICANS ARE DIVIDED: On whether student loan forgiveness fair to those without college degrees.
The administration already has erased roughly $32 billion in student debt for 1.6 million borrowers by widening the eligibility requirements for pre-existing relief programs. It cleared the debt of those who attended predatory colleges and the permanently disabled. It also has canceled more than $10 billion in student debt for those working in the public sector.
Biden's latest plans mean forgiving billions more in student loan debt for millions of borrowers, eclipsing the administration’s past actions. Yet millions of Americans will be left with student loan debt, especially those who pursued advanced degrees or had less financial support from their families or scholarships to pay for college.
What will forgiving student loans cost?
It's not clear how far the plan will go or what it will cost. One analysis found that forgiving $10,000 per borrower would wipe $321 billion in student loan debt, and it would completely erase the debt for about a third of borrowers, or roughly 12 million people. Another this week found that forgiving federal college student loan debt will cost between $300 billion and $980 billion over 10 years, depending on exactly how the program is rolled out.
An analysis of student debt by Mark Kantrowitz, who has written several books about student financial aid, estimated that forgiving the debt of borrowers who owe $10,000 or less and make less than $125,000 annually would cost about $46 billion and cover 23.5% of borrowers.
Progressives led by Senate Majority Leader Chuck Schumer, Sen. Elizabeth Warren and Rep. Ayanna Pressley repeatedly called on the administration to cancel $50,000 in debt per borrower. But the top conservatives on education committees, Sen. Richard Burr and Rep. Virginia Foxx, have questioned the Education Department’s authority to freeze student loan payments and discharge debt.