Biden to cancel up to $10K in federal student loan debt for certain borrowers and up to $20K for Pell Grant recipients

WASHINGTON (NBC News) — The Biden administration announced Wednesday that it will cancel up to $10,000 in student debt for borrowers who earn $125,000 a year or less and up to $20,000 for recipients of Pell Grants.

Couples who earn $250,000 a year or less who file taxes jointly will also qualify for cancellation of up to $10,000 for each partner. The administration is also extending the payment pause on federal student loans for a final time through Dec. 31.

President Joe Biden will speak about his administration’s plan to relieve student loan debt at 2:15 p.m. on Wednesday.

You can watch live here.

You can go to the federal student aid website for an explanation of the Biden administration’s student loan relief program.

Here is a statement from Senator Chuck Schumer about the student loan forgiveness plan:

Senate Majority Leader Chuck Schumer (D-NY) released the following statement today after President Biden announced his plan to cancel student loan debt. The announcement comes after nearly two years of Senator Schumer calling for broad student loan debt cancellation.

“With the flick of a pen, President Biden has taken a giant step forward in addressing the student debt crisis by cancelling significant amounts of student debt for millions of borrowers. The positive impacts of this move will be felt by families across New York and the nation, particularly in minority communities, and is the single most effective action that the President can take on his own to help working families and the economy.

“This action, along with the pause on federal student loan payments, interest, and collections will improve borrowers’ economic security, allowing them to invest in their families, save for emergencies, and pay down other debt. In addition, I am pleased to see the President’s proposed work towards greatly simplifying and expanding access to student loan relief programs, including the Public Service Loan Forgiveness program, and look forward to additional improvements to other programs like Income Driven Repayment, which will also allow millions more student loan borrowers to better access existing programs to reduce their student loan debts.

“No president or Congress has done more to relieve the burden of student debt and help millions of Americans make ends meet. Make no mistake, the work will continue as we pursue every available path to address the student debt crisis, help close the racial wealth gap for borrowers, and keep our economy growing.”

Biden had come under criticism from student debt relief advocates for waiting until just days before the Aug. 31 deadline to announce an extension, leaving millions of borrowers unclear about whether they would have to start making payments for the first time in more than two years.

Although the president made good on his campaign promise to address student debt, the move falls short of the $50,000 in cancellation that some Democrats have called for.

The narrow scope of the cancellation is also likely to frustrate student debt relief advocates who were pushing for broader action. Some advocates warned that means testing would make implementation more challenging and have argued that extending the payment pause for a few months would not be enough time to make adjustments to borrowers’ balances.

“While this announcement is a major win for many, it is important to stress that $10,000 will leave many others still crushed by debt, and important details will determine who has access to much-needed relief,” said Natalia Abrams, the president and founder of the Student Debt Crisis Center.

Federal student loan holders haven’t been required to make payments since March 2020, when former President Donald Trump signed into law the CARES Act, which paused payments through September 2020 and stopped interest from accruing in an effort to alleviate the economic impacts of the pandemic.

Trump later took executive action to extend the deferral period through January 2021. Since taking office, Biden has issued five more extensions.

The moratorium doesn’t apply to borrowers with privately held loans.

Although the president has said that the economy has rebounded from the pandemic and has ended most other Covid-era economic support, some Democrats have warned Biden that turning payments back on so close to the midterm elections could upset voters. Some have also argued that it would be unfair to restart payments while high inflation is pushing up essential costs, such as food and rent.

Advocates for debt forgiveness have become increasingly frustrated with Biden’s drawn-out decision-making process on student loans. They have also argued that the longer payments remain paused, the more politically difficult it will be for the president to restart them.

Roughly 45 million Americans have student debt. The Federal Reserve estimated that in the second quarter of 2022, Americans owed more than $1.7 trillion in student loans.

While most student borrowers owe less than $20,000, people with smaller amounts of debt often have a harder time paying it off because they might not have completed their degree or have degrees with lower earning power compared to those with more debt.

Studies also show that students of color are more likely to take on student debt and struggle disproportionately to pay it back. The highest default rates are among students who attended for-profit institutions.