On Wednesday, President Joe Biden announced a federal student loan waiver that would eliminate $10,000 for students making $125,000 or less a year, a plan that could cost the government $300 billion.
The plan calls for a four-month extension of the student loan pause, which will be the last, with repayment scheduled to resume in January, Biden said during the announcement Wednesday.
The law also applies another waiver of $10,000, bringing the total to $20,000 for Pell Grant students.
“True to my campaign promise, my administration is announcing a plan to give working and middle-class families a break as they prepare to resume federal student loan payments in January 2023,” Biden tweeted announcing the plan.
The plan would also cut monthly student loan payments in half for millions of borrowers to qualify for aid
The plan also aims to cut monthly student loan payments by 50 percent and overhaul the Public Service Loan Forgiveness program, as well as make the existing student loan system easier to manage for both current and future borrowers.
The proposed federal rule would change student loan repayment based on income and halve the amount borrowers would have to pay each month on their student loans, “while borrowers with both student loans and student loans would pay a weighted average rates”.
Meanwhile, the Department of Education plans to announce details of how borrowers can apply for this loan relief in the coming weeks, according to CNN.
The app is expected to be available at the end of December when the repayment pause ends.
The publication reports that millions of borrowers will be eligible for loan forgiveness automatically based on existing income data.
Last month, thousands of students gathered in Washington to call for student debt relief.
Student debt cancellation could cost the federal government $300 billion, according to estimates
While student debt cancellation will provide financial relief to millions of Americans, the costs will ultimately fall on the federal government.
CNN reports that the plan could cost Uncle Sam $300 billion, citing an estimate The Penn Wharton Budget Model. To put this in context, there is currently $1.6 trillion in outstanding federal student loan debt.
The Committee for a Responsible Federal Budget says the amount of outstanding debt will return to that level in just four years if the $10,000 per borrower cap is eliminated, which does not provide additional aid to Pell grant recipients.
Loan cancellation also does not address the real root of the problem, which is the cost of college and higher education.
Since taking office, Biden has long faced political pressure from the left, from Senate Majority Leader Chuck Schumer and Massachusetts Sen. Elizabeth Warren, to cancel student loan debt.
Biden announces cancellation of student debt amid political pressure from the left
Schumer and Warren previously called on Biden to cancel the $50,000 per borrower, according to CNN.
Biden met with them on Tuesday, along with Democratic Sen. Raphael Warnock of Georgia, a day before his announcement.
Schumer and Warren released a joint statement calling the move “a giant step forward in addressing the student debt crisis.”
“The positive effects of this step will be felt by families across the country, especially in minority communities, and it is the single most effective action the president can take on his own to help working families and the economy,” they added.
Meanwhile, Mark Goldwein, senior vice president and policy director of the Committee for a Responsible Federal Budget, argued that the plan would likely increase inflation and undermine the goals of the Democrats’ Inflation Reduction Act.
Last week, Biden similarly announced that he would cancel an additional $3.9 billion in student loan debt for more than 200,000 students who attended ITT Technical Institute. Shadow room informed.
