Biden Expected to Announce Continued Student Loan Pause and Cancellation of $10K in Debt for Certain Borrowers
After months of waiting for President Joe Biden to make a decision on federal student loan debt, borrowers are finally going to get an answer — and there’s already debate on whether that answer is good or bad.
Biden is expected to announce on Wednesday a plan that would extend the federal student loan pause through the end of 2022 and also provide $10,000 in debt relief to borrowers with incomes of less than $125,000 a year, according to various news reports. If the latter happens, it would affect about 45 million borrowers nationwide, The New York Times reported.
Bloomberg and the Wall Street Journal were among the first media outlets to report that Biden’s announcement will come on Wednesday, Aug. 24 – a week before the current student loan payment pause is set to expire. Bloomberg, citing White House sources, reported that the pause will be continued through December 2022.
The pause originally went into effect in 2020 to help borrowers deal with financial fallout from the COVID-19 pandemic. Since taking office in early 2021, Biden has already extended the pause four times, most recently in April, CNN reported. Many lawmakers and consumer advocates have urged the president to extend it even further to help Americans cope with the highest inflation rate in more than 40 years.
There have also been numerous calls for Biden to cancel loans for certain borrowers – something he suggested he might do as a presidential candidate two years ago. But no matter what Biden ultimately announces Wednesday, there is likely to be blowback on both sides of the political aisle.
Many Republican lawmakers are against any further payment pauses or debt relief, arguing that canceling debt for some borrowers and not others is unfair to the millions of borrowers who have already paid off their loans in full. There is also concern among both Republican and Democratic economists that extending the pause further will exacerbate inflation by giving borrowers more money to spend.
Meanwhile, as Bloomberg noted, many leading Democratic lawmakers, labor leaders and civil-rights groups have pressured the White House to forgive more than $10,000 in student debt, arguing that higher debt loads are disproportionately carried by Black or lower-income students.
Even forgiving $10,000 per borrower for those in a certain income group “barely makes a small dent” in the $1.7 trillion Americans currently owe in student debt, said Kristen Carlisle, general manager at Betterment at Work, a financial services company that offers investment and retirement solutions.
“People across all ages still have to cope with the stress that comes with resuming student loan payments while they’re still stabilizing themselves after economic uncertainty since the start of the pandemic,” Carlisle told GOBankingRates in an email statement.
White House officials are quick to defend Biden’s record on student loan relief, noting that the president has already canceled about $32 billion in debt for more than 1.6 million Americans after reviving and expanding relief programs that sat dormant during the Trump administration.
“No one with a federally held loan has had to pay a single dime in student loans since President Biden took office,” White House spokesperson Abdullah Hasan told The New York Times.
The Biden administration also has eliminated student loan debts for eligible public service workers, permanently disabled borrowers, students who were defrauded by their schools, and students whose schools closed while they were enrolled.
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