President Biden’s Student Loan Forgiveness Plan – What Every Family Should Know

The excitement surrounding President Biden’s Student Loan Forgiveness Plan is palpable as he announces the cancellation of federal student loans. Discover his promises, the opposition he has faced, and the life-changing benefits borrowers could experience from his innovative ideas.

After COVID-19’s global destabilization in March 2020, the federal government has taken a number of steps to help American families weather the economic storm. Two presidents and Congress have temporarily suspended federal student loan repayment and interest accrual, freeing up almost 37 million borrowers’ income for things like child care, rent, food, and gas.

Vice President Joe Biden has finally made public his proposal to reduce the burden of student debt. The idea asks for a $20,000 debt forgiveness for people who received a Pell Grant and a $10,000 debt forgiveness for everyone else. To qualify for forgiveness, your yearly income must be lower than $125,000. Undergraduate loan borrowers have the option to pay no more than 5% of their discretionary income each month. The new student loan payments moratorium has also been extended until December 31. (The timeout has been prolonged six times before.)

On August 24, Biden tweeted that the government would announce a proposal to provide families in the middle class with some financial breathing room before the repayment of federal student loans begins again in January 2023.

Here is what families must know about President Joe Biden’s remarks regarding student loan forgiveness and repayment and the path to achieving these goals.

The Student Debt Forgiveness Plan that Vice President Biden has Offered to the American People

Biden has been advocating for student loan forgiveness ever since he ran for President, with his most recent proposal calling for up to $10,000 in debt to be erased for qualified borrowers through congressional action.

Senator Elizabeth Warren and her colleagues have advocated that the federal government forgive at least $10,000 per borrower in student loan debt. In March 2020, Vice President Joe Biden tweeted that the government should do the same. “The past crisis was especially hard on young people and those with significant student loans. It mustn’t happen again.”

To date, he has canceled nearly $34 billion in student debts through various loan forgiveness programs and a recent settlement deal in a class-action lawsuit, and this was all before Wednesday. It was up to Vice President Biden to make the call and come up with a permanent fix after Congress failed to give relief to the vast majority of borrowers.

Opposition to Biden’s Plan to Forgive Student Loans

President Biden’s offer of loan forgiveness or outright cancellation came as a relief for many Americans who have lost ground due to the pandemic and now inflation. But, Conservatives are said to view the decision as fiscally unwise by USA Today.

The committee for a Responsible Federal Budget (CRFB), a nonpartisan, non-profit organization, estimates that canceling up to $10,000 in federal student loans per borrower, depending on the income ceiling imposed by the Biden administration, would cost the government around $245 billion.

Liberal and conservative opponents of student loan forgiveness share the concern that doing so could contribute to higher inflation, while others worry that it could lead to reductions in funding for vital social programs like Social Security or those that provide free or reduced-price lunches for low-income students. They worry that if social programs like universal pre-K or guaranteed family leave are seen as overly expensive, they will not gain traction in the future.

Others in the Democratic Party and the progressive movement have already criticized what they see as the shortcomings of Biden’s plan. Senator Chuck Schumer, Senator Elizabeth Warren, House Financial Services Chairwoman Maxine Waters, and Representatives Ayanna Pressley, Alma Adams, Ilhan Omar, Jamaal Bowman, Mondaire Jones, and Ritchie Torres, among others, introduced a bicameral resolution in February 2021 urging the President to use executive action to forgive up to $50,000 in federal student loans for individual borrowers.

Recent criticism of the $10,000 idea has focused on its omission of a plan to reduce the average amount of debt carried by Black People. In June 2022, the Education Data Initiative reported that Black and African American college graduates owed $25,000 more in student loans than white grads.

“Canceling $10,000 in student debt when the typical white borrower owes $12,000 and Black women hold an average of over $52,000 is not only unacceptable, it’s institutional racism,” tweeted Nina Turner, a senior scholar at the Institute of Race, Power, and Political Economy.

Forgiveness of Student Debt Can Have Positive Effects on Families

A debate has been sparked about the financial implications of canceling or forgiving student loans, but proponents point to the many positive outcomes for American households.

According to The Hill, if everyone who owes more than $10,000 on their student loans had their debts forgiven, it would be nearly 15 million people or about a third of all U.S. student loan borrowers, and it would also reduce the $1.7 trillion in outstanding student loan debt in the United States. Those who have taken out student loans themselves or whose children are enrolled in higher education will find this helpful information. This is hardly surprising given that half of all parents surveyed by ParentsTogether Action said they would go hungry if they had to start paying back their school loans again. It also revealed that 60% of parents are unable to save money for the future because of student loan debt and that 33% of parents said that student loan debt had prohibited them from buying a home.

Of course, a lot of other people in the United States will gain from this, too. In May of 2022, 529 separate groups wrote to President Biden and Vice President Kamala Harris pleading for “broad-based debt cancellation,” arguing that it would “boost household wealth, increase small business formation, and provide much-needed economic relief during this historical period of inflation.” The group claims the executive action will “provide a lift to as many as 44 million debtors and the economy.”

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