The question on millions of student loan borrowers’ minds was settled Wednesday, as the Biden administration announced it would cancel $10,000 in debt for borrowers earning up to $125,000 and provide an additional $10,000 in relief to borrowers who received a Pell grant when they went to college.
The administration also announced it would extend the pause on student loan payments, collections and interest, through December 31. The freeze was scheduled to expire on August 31.
The White House said the announcement would cancel the debt of roughly 20 million borrowers and said that nearly 90% of the relief would go to households earning less than $75,000 a year. No household in the top 5% of incomes would receive relief.
Still $10,000 in broad-based cancellation, particularly with a means test, is not as drastic as some lawmakers, advocates and borrowers themselves had hoped. At the same time, critics of mass student debt relief have charged that it would provide a benefit to Americans near the top of the income scale and could add fuel to an already inflationary economic environment.
“For millions of people and millions of families it would have a huge effect,” Abby Shafroth, director of the Student Loan Borrower Assistance Project at the National Consumer Law Center, said of the policy announced Wednesday.
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Since Biden took office, the question of whether his administration would provide some kind of broad-based student debt relief has loomed over his presidency. For his part, Biden always expressed some hesitation at canceling the debt through executive action and particularly at discharging any amount larger than $10,000.
Instead, the Biden administration had focused on so-called targeted forgiveness, discharging debt for borrowers, including those scammed by their schools and borrowers with severe disabilities, who were waiting on promised relief from government programs for years. Republican lawmakers have criticized any relief the Biden administration has provided to student loan borrowers as an unfair cost to taxpayers.
This is a developing story. Check back for updates.