In keeping with a promise he made during his bid for the presidency in 2020, President Joe Biden announced on Wednesday that the federal government will cancel $10,000 in student loans for millions of former college students whose annual income is less than $125,000. In addition, loan repayments will resume in January 2023 as part of the COVID-19 recovery plan, the White House has announced.
The new policy outlines that government will forgive more debt, $20,000 for some people based on their parent’s income, also known as pell grant eligibility, at the time they went to school. This translates that former students whose parents had higher income and did not qualify for pell Grant will only receive 10,000 in debt forgiveness now.
Some economists warned that it may fuel inflation, and Republicans in the US Congress questioned whether the president had the legal authority to cancel the debt. The move could increase support for his fellow Democrats in the November congressional elections.
According to experts, debt forgiveness could release hundreds of billions of dollars for fresh consumer spending that may be used for home purchases and other large-ticket items, adding a new wrinkle to the country’s fight against inflation.
The actions are “for families that need them the most – working and middle-class people hit especially hard during the pandemic,” Biden said during remarks at the White House. He pledged no high-income households would benefit, addressing a central criticism of the plan.
In reference to a $2 trillion tax cut approved by Republicans under former President Donald Trump, Biden said, “I will never apologize for helping working Americans and the middle class, especially not to the same folks who voted for a $2 trillion tax cut that mainly benefited the wealthiest Americans and the biggest corporations.”
Since the start of the COVID-19 pandemic, borrower balances have been frozen, and most federal student loans have required no payments since March 2020. Biden was under pressure from several Democrats to forgive up to $50,000 per borrower, but in this debt cancellation plan, only a $20,000 maximum will be canceled for qualifying borrowers.
