Aug 23, 2022 - Politics & Policy

What's at stake with Biden's looming student loan announcement

Rep. Rashida Tlaib (R-MI) (2nd from L) attends a rally outside of the White House to call on U.S. President Joe Biden to cancel student debt on July 27, 2022
Rep. Rashida Tlaib (D-Mich.) attends a rally outside the White House to call on President Biden to cancel student debt on July 27. Photo: Anna Moneymaker/Getty Images

President Biden is expected to announce as soon as Wednesday whether he will resume monthly student loan debt payments or cancel any debt altogether — after months of deliberation and speculation.

Why it matters: Biden may be zeroing in on providing $10,000 of debt relief per borrower, a promise he made on the campaign trail, which could relieve 43 million Americans of some federal student loan debt.

  • Biden is reportedly considering capping debt relief for individuals making under $125,000 a year and families making under $250,000 a year, per Politico.

Between the lines: While Biden's plan would be historic, it may not be enough to address the disproportionate impact that higher debt loads have on Black and lower-income students.

  • Black college graduates hold an average of $25,000 more in student loan debt than white college graduates and are more likely to struggle financially due to student loan debt.
  • One-quarter of student loan borrowers owed less than $10,000 in outstanding student debt in 2021, per the Federal Reserve.

State of play: The Biden administration has so far approved nearly $32 billion in loan discharges for Americans, which predominately covered borrowers who were defrauded by their colleges.

  • But, the announcements so far have been separate from his long-awaited decision on broad student loan forgiveness.
  • The administration has faced mounting pressure from progressives and Democratic lawmakers to cancel $50,000 per borrower — a proposal that Biden has repeatedly pushed back on.
  • Biden has been hesitant since taking office to unilaterally cancel student loan debt, saying that he may lack the authority to do so through executive action, Forbes notes.
  • Republicans this month announced a plan on student loan forgiveness and repayment but also called for the end of the student loan repayment pause.

Be smart: Biden in making his announcement has likely weighed the potential gain of invigorating young and minority voters less than three months before the midterm election with the risk of fueling inflation, which has been used as a rallying call for Republicans and some independents.

By the numbers: Americans owe an estimated $1.75 trillion in student loan debt, spread out among about 48 million borrowers, per Student Loan Hero, an online site for managing student loans.

  • 30% of all adults, more than 4 in 10 people who went to college, said they incurred at least some debt for their education, per the Federal Reserve.
  • Adults under 30 who attended college were more likely to have taken out loans than older adults.
  • Among the class of 2020, 55% of bachelor’s degree graduates of four-year public and private nonprofit colleges took out student loans, graduating with an average of $28,400 in federal and private debt, per Student Loan Hero.
  • The median amount of education debt in 2021 was between $20,000 and $24,999, per the same data.

The big picture: The Biden administration has extended the student loan payment freeze multiple times during the pandemic, allowing millions to postpone their payments.

  • During the freezes, interest rates have been frozen and collections on defaulted debt have been on hold, CNN notes.
  • Forgiving student loan debt of $10,000 per borrower would cost about $300 billion for borrowers with incomes less than $125,000, an analysis released Tuesday found.
  • The cost increases to $330 billion if the program is continued over the standard 10-year budget window.

What to watch: Biden's announcement, which may come as early as Wednesday, may provide clarity for millions of Americans on whether any portion of their student loan debt will be forgiven — and if he'll extend the student loan payment freeze once again.

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