Biden to Cancel Up to $10K in Student Loans, $20K for Pell Grant Recipients
President Joe Biden will soon deliver on a campaign promise to cancel student loan debt, but not all borrowers will see debt erased.
- There is more than $1.7 trillion in outstanding federal student loan debt in the U.S.
- Those who received Pell Grants in college can qualify for more debt cancellation.
- The Biden administration also announced a final extension on the pause on student loan repayments through the end of the year.
Many student loan borrowers will soon see up to $20,000 in federal debt erased, President Joe Biden announced in a tweet on Wednesday.
This relief will come to those making less than $125,000 per year, or $250,000 for couples who file their taxes jointly, according to a Department of Education (ED) press release. Borrowers who meet those thresholds and also received a Pell Grant while enrolled in college will have up to $20,000 in loans forgiven. Those who did not receive a Pell Grant can have up to $10,000 in federal loans forgiven.
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.— President Biden (@POTUS) August 24, 2022
I'll have more details this afternoon. pic.twitter.com/kuZNqoMe4I
Biden said during a Wednesday afternoon press conference that approximately 43 million Americans can benefit from this action.
To help facilitate the loan relief process, ED will also extend its moratorium on federal student loan debt payments. The pause was set to expire at the end of August, but will now run until Dec. 31. This means borrowers should plan to resume payments in January 2023.
ED estimates that nearly 8 million will be eligible for automatic forgiveness.
However, only those with relevant income data already available to the department will have debt erased automatically. Some experts previously predicted that an income verification system may be necessary for other borrowers, and the department promised to release more details about the planned forgiveness plan "in the weeks ahead."
Over 43 million borrowers hold federal student loan debt. Biden's administration previously announced a plan to eliminate the effects of a defaulted status on their loans through its "Fresh Start" initiative, meaning all federal debt owners will presumably qualify for forgiveness.
Biden and ED Secretary Miguel Cardona framed the relief as continued support throughout the COVID-19 pandemic, as well as a solution to the lead weight student debt had become for many borrowers even before the pandemic.
"Earning a college degree or certificate should give every person in America a leg up in securing a bright future," Cardona said in a statement. "But for too many people, student loan debt has hindered their ability to achieve their dreams — including buying a home, starting a business, or providing for their family."
Biden promised to cancel federal student debt during his campaign for president in 2020. Advocates and lawmakers continually called on the president to deliver on his promise during his first year in office, but repeated extensions of the COVID-19 moratorium on student loan payments served as a placeholder until now.
Some suspect that impending midterm elections may also be a catalyst for why the president decided now was the time to offer widespread relief.
Millions of borrowers are expected to benefit from cancellation, but the move isn't without some critics.
Conservative politicians have long spoken out against Biden's promise of sweeping forgiveness. Some have said such forgiveness disproportionately benefits the wealthiest Americans. Others say it is unfair to those who already paid off their debt, and still others claim such a move is purely a political play to woo voters toward Democratic candidates in the upcoming midterms.
Some progressives were hoping for further-reaching forgiveness.
Some Democratic leaders, including Sen. Majority Leader Chuck Schumer, called upon the president to forgive up to $50,000 per borrower. More progressive lawmakers and borrower advocacy groups hoped for complete forgiveness of all federal student loans.
Still, high-ranking Democratic lawmakers were quick to praise the move.
"Today is a day of joy and relief because President Biden has canceled a big chunk of student debt for as many as 43 million Americans," Sen. Elizabeth Warren said in a statement. "The president has taken a powerful step to help rebuild the middle class."
The potential for up to $20,000 in relief per borrower is beyond many of the rumors circulating over the summer. Many expected only up to $10,000 per borrower, and there had not been discussions of additional relief for Pell Grant recipients.
Biden said during his press conference that approximately 27 million borrowers will be eligible for up to $20,000 in debt cancellation. Approximately 20 million will see their federal student loan debt completely erased.
A BestColleges analysis of student debt found that in 2021, total debt surpassed $1.7 trillion and federal debt had roughly tripled since 2007. Among borrowers with outstanding debt, the median debt amount in 2021 was between $20,000 and $24,999.
Federal student loans account for more than 92% of all student loan debt.