Latest White House plan would forgive $10,000 in student debt per borrower

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White House officials are currently considering canceling $10,000 in student debt per borrower, after months of internal deliberations over how to structure loan forgiveness for tens of millions of Americans, three people with knowledge of the subject.

President Biden had hoped to make the announcement as early as this weekend at the University of Delaware, the people said, but that timing changed after Tuesday’s massacre in Texas.

The White House’s latest plans called for limiting debt forgiveness to Americans who earned less than $150,000 the previous year, or less than $300,000 for married couples filing jointly, two of the people said. It was unclear whether the administration would simultaneously demand the resumption of interest and payments at the end of August, when the current pause is due to expire.

The people, who spoke on condition of anonymity because they were not authorized to discuss the deliberations, warned that some details of those plans could change before the White House formalizes the decision.

Who Has Student Loan Debt in America?

The likely decision follows months of uncertainty over the fate of student debt for tens of millions of Americans, with Biden appearing skeptical at times about canceling loans but under pressure from his crashing ratings. approval among young voters ahead of the November elections. The decision will also spark new fights between Democrats and Republicans over federal spending and could prove to be a defining issue on the campaign trail, as GOP lawmakers have already said the idea amounts to wasteful spending that primarily benefits affluent college-educated professionals.

The White House said no final decision has been made on this. Biden said he would make a decision on student debt in the “coming weeks” on April 28, nearly a month ago.

“A decision has not yet been made,” Vedant Petal, a White House spokesman, said in a statement Thursday.

Wiping out $10,000 of debt per borrower could cost about $230 billion, according to estimates from the Committee for a Responsible Federal Budget, a nonpartisan think tank. However, resuming payments for borrowers, which have been on hold since March 2020, would bring additional money to federal coffers. The think tank said in March that the suspension of payments had cost the federal government $100 billion and would cost about $50 billion a year to maintain. The Washington Post previously reported that the administration was considering making only undergraduate debt eligible for forgiveness.

Black women bear a disproportionate share of the $1.7 trillion student debt burden. Here’s what the student loan payment suspension meant to them. (Video: Amber Ferguson/The Washington Post, Photo: Eric Lee/The Washington Post)

The White House has been looking for economic measures it can pass without congressional approval since the collapse of Biden’s Build Back Better economic agenda late last year. But while the administration has reviewed polls suggesting a large majority of young voters support debt cancellation, the politics of that move remain unclear. Biden’s approval ratings on the economy have plummeted amid the fastest price increases in four decades, and his plans to improve housing, health care and child poverty have been stalled by failure negotiations with Sen. Joe Manchin III (DW.Va.). Republicans will further pillory the decision to have been made unilaterally, without Congress, and even some centrist Democrats are uncomfortable with the idea.

Biden told a meeting of Hispanic lawmakers last month that he was ready to forgive student loan debt. He had promised during the 2020 presidential campaign to write off at least $10,000 of debt per borrower, after Sen. Elizabeth Warren (D-Mass.) and other liberals pushed the idea.

Most of the country’s 41 million student borrowers stand to benefit. According to the latest data from the Department of Education, canceling $10,000 of debt for everyone with federal student loans would settle the balances of about one-third of borrowers, while reducing total debt by at least half for an additional 20%. It’s unclear, however, how the income limits would affect those numbers. According to Matt Bruenig, founder of the left-leaning think tank People’s Policy Project, about 97% of all student debt was held by people earning less than the $150,000 per person and $300,000 per couple threshold in 2019.


Most student debt is held as large loans, but most borrowers have small loans.

About 13% of federal student debt is held in loans of $20,000 or less…

…but 53% of borrowers owe less than $20,000

33% of borrowers have $10,000 or less left on their loans

Source: Ministry of Education

ALYSSA FOWERS/THE WASHINGTON POST

Most student debt is held as large loans, but most borrowers have small loans.

About 13% of federal student debt is held in loans of $20,000 or less…

…but 53% of borrowers owe less than $20,000

33% of borrowers have $10,000 or less left on their loans

Source: Ministry of Education

ALYSSA FOWERS/THE WASHINGTON POST

Most student debt consists of large loans, but most borrowers have small loans.

About 13% of federal student debt is held in the form of loans with $20,000 or less still owing…

…but 53% of borrowers owe less than $20,000

33% have left on their loans

Source: Ministry of Education

ALYSSA FOWERS/THE WASHINGTON POST

The White House is not expected to immediately release full details of the process borrowers would use to get their debts forgiven. But that could be quite complicated logistically.

For example, the administration imposes an income cap on eligible individuals to ensure that high earners do not receive government assistance they do not need. But there are obstacles to using revenues to target debt relief. The Education and Treasury Departments cannot easily share borrowers’ tax information, and the legislation easing the restriction will not come into effect for two years.

Biden administration gives more borrowers the chance to cancel their debt

Relying on tax data could also exclude millions of low-income Americans who do not file taxes but owe student loans. A self-certification process, whereby people certify that their income is eligible, could pose challenges for the government to verify information. Even asking borrowers to apply for forgiveness could limit the scope of the policy. And since it will likely take months for the Department of Education to implement a program, the political benefits could be limited.

Supporters of student debt cancellation, including Warren and Senate Majority Leader Charles E. Schumer (DN.Y.), have urged the administration to go much further and write off at least $50,000. per borrower, if not all outstanding federal education loans. They say reducing the student loan burden would help stimulate the economy and close the racial wealth gap as black borrowers take on disproportionate debt. Ahead of a rally at the White House earlier this month, Wisdom Cole, national director of the NAACP’s youth and college division, said, “The black community continues to be shackled by student debt, and a 10,000 $ will not break strings.

White House officials weigh income limits for student loan forgiveness

But some economists have argued that lavishing loan forgiveness on college graduates is an irresponsible and costly policy. The Committee for a Responsible Federal Budget has estimated that about 70% of the benefits will go to those in the upper half of the income spectrum. Critics of debt forgiveness also say it does nothing to fix tuition fees or the ailing loan system. It’s unclear whether people who need to borrow to start college this fall, for example, would be eligible for any new loans to be forgiven.

Yet even by capping the rebate at $10,000, the Biden administration could help the people who arguably need cancellation the most — those who are in default. Delinquencies and defaults on student loans were concentrated among borrowers with less than $10,000 in debt before the pause in federal student loan repayments, according to the Federal Reserve. Fed economists say borrowers with less debt often struggle to repay their loans, in part because they haven’t earned the degree needed to improve their incomes.

The reduction in loan forgiveness parameters is consistent with the Biden administration’s targeted approach to debt relief. The administration has already erased $18.5 billion in loans for more than 750,000 people by temporarily expanding or streamlining existing forgiveness programs, including those designed to help government officials and borrowers defrauded by their colleges.

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