The program will forgive up to $10,000 in student loans for some borrowers and cost taxpayers over $300 billion.
Today, President Joe Biden announced a student loan forgiveness plan that would pay off up to $10,000 of student loan debt, per borrower, for those who make under $125,000 annually. For married couples who file jointly and make under $250,000, the same relief could be made per person.
This amount is estimated to cost taxpayers roughly $300 billion.
The plan has three parts:
- Provide debt relief up to $10,000 for those making under $125,000 yearly or a couple making under $250,00
- Make the student loan system more manageable by cutting monthly payments in half for undergrad loans, fixing the Public Service Laon Forgiveness program so that borrowers who have worked for non-profits, military, tribal, local or federal government receive credit toward loan forgiveness.
- Protect future students and taxpayers by reducing the cost of college and holding schools accountable when prices rise.
Loan interest will also be paused until the end of 2022.
Student loan debt has reached $1.6 trillion nationally and impacts more than 43 million Americans who have federal student debt. Reports show that almost a third of those people owe less than $10,000 and more than half owe less than $20,000.
The Biden Administration said they believe if the benefits are taken advantage of by those who qualify, nearly 90 percent of debt cancellation will go to borrowers making less than $75,000 yearly.
“President Biden believes that a post-high school education should be a ticket to a middle-class life, but for too many, the cost of borrowing for college is a lifelong burden that deprives them of that opportunity. During the campaign, he promised to provide student debt relief. Today, the Biden Administration is following through on that promise and providing families breathing room as they prepare to start re-paying loans after the economic crisis brought on by the pandemic,” the White House Press release stated.
However, some Mississippi public officials believe that any student loan forgiveness puts the average American in a more difficult spot because the dollars will be found in higher taxes.
“Today Biden will announce that welders, plumbers, laborers, & other Mississippians (black, white, Hispanic, etc.) will be forced to pay off the debts of Harvard doctorate degree gender studies majors living in California,” Governor Tate Reeves said. “Why does the Democrat Party hate working people so much?”
Today Biden will announce that welders, plumbers, laborers, & other Mississippians (black, white, Hispanic, etc.) will be forced to pay off the debts of Harvard doctorate degree gender studies majors living in California.
Why does the Democrat Party hate working people so much?
— Governor Tate Reeves (@tatereeves) August 24, 2022
Congressman Michael Guest agreed with the Governor.
“Plenty of hard-working Americans chose not to pursue a college education or worked their way through college to pay for their education. These tax-paying citizens will be the ones paying for Biden’s $300 billion payout. There is nothing fair about this,” Guest tweeted. “The President’s action is also potentially illegal and will almost certainly invite legal challenges. President Biden is testing the outer limits of his authority and could soon face a reality check in court.”
Plenty of hard-working Americans chose not to pursue a college education or worked their way through college to pay for their education. These tax-paying citizens will be the ones paying for Biden’s $300 billion payout. There is nothing fair about this.
— Congressman Michael Guest (@RepMichaelGuest) August 24, 2022
Senator Roger Wicker called the decision unfair to the working families of America.
“The President’s unilateral action today is unfair to the majority of American taxpayers,” Wicker said. “Instead of tackling the inflation that is affecting us all, President Biden has chosen to advance the interests of a select few who knowingly took on student debt. Many Americans have taken a different path to avoid student debt – for example, serving in the military or pursuing a different career option. The President’s action takes their hard-earned tax money and gives it to those who made financial decisions that the President favors. This is deeply unfair.”
Others say there could be a benefit to a portion of loan forgiveness but that the federal government should first focus on paying off the accrued interest instead of the principal.
A recent analysis from the Committee for a Responsible Federal Budget (CRFB) said that a $10,000 loan forgiveness plan would offset any proposed benefits of the Inflation Reduction Act. The CRFB believes the debt cancellation will put additional inflationary pressure on the economy overtime.
The Inflation Reduction Act is expected to cost roughly $739 billion. Critics have disagreed with the Act’s provisions, saying that it will only further increase inflation, continue to put the burden of economic distress on the backs of the middle class, and create a larger gap between the super wealthy and poor.
Regarding future higher education costs, the proposal by Biden instructs the Department of Education to create new actions that would hold colleges and universities accountable for rising costs. These guidelines include publishing an annual watch list of the programs with the worst debt levels in the U.S. so that students registering for the next year are aware before applying.
The guidance also includes requesting institutional improvement plans from the worst actors that outline how the colleges with the most concerning debt outcomes intend to bring down debt levels.
Biden’s administration contradicts what many say about the strain to be felt in the middle class. According to the press release, he says that these dollars will in fact target low and middle-income borrowers. However, the program must be paid for by someone and the expectation is to take it out in additional taxes.
Borrowers can sign up to be notified when this information is available at StudentAid.gov/debtrelief.