What Biden's student debt forgiveness plan means for Pennsylvanians
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Many Pennsylvanians saddled with student loans are poised to see some relief after President Biden announced a debt forgiveness plan on Wednesday.
Driving the news: The Biden administration is canceling up to $20,000 in student debt for Pell Grant recipients and up to $10,000 for individual borrowers who make under $125,000.
- The White House is also extending the pause on repayments by four months and putting in place new policies around the student loan system.
The big picture: The decision — days before the Aug. 31 deadline when loan repayments were set to resume after a series of pandemic pauses — is expected to alleviate some of the debt burdens of 43 million Americans, Axios' Sophia Cai and Erin Doherty report.
- Approximately 20 million Americans could have their debt completely canceled under Biden's announcement,
By the numbers: About 1.8 million Pennsylvanians have federal student loans, as of March, according to the Federal Student Aid Office. They collectively owe more than $65 billion.
- Pennsylvania has the 24th highest federal student loan debt average in the nation, at $35,385, according to the Education Data Initiative.
Between the lines: Biden's proposal would cost the government at least $300 billion over the next decade, according to an analysis from the Penn Wharton budget model.
- Roughly 70% of the debt relief will accrue to borrowers in the top 60% of the income distribution.
Plus: The Biden administration also is aiming to make the student loan system more manageable for future borrowers.
- It will cap monthly payments at 5% of a borrower's monthly income and forgive loan balances after 10 years of payments for borrowers with loan balances of $12,000 or less, among other measures.
What they're saying: Kerry Smith, a lawyer with Community Legal Services (CLS), told Axios that Biden's plan would be transformative for many low-income individuals in Philly struggling to repay their student debt.
- "It will mean they have more money in their pockets to pay their rents, to buy food for their families and be on a path to financial security," she said.
Yes, but: Smith added that government policies, such as a lack of investment in public education and poor oversight of student loan services, have contributed to the ongoing student loan crisis.
Laura Perna, an expert on college access and affordability at the University of Pennsylvania, said Biden's plan recognizes the value of higher education as well as the challenges around college affordability. But students will continue to seek loans to pay for the rising costs of higher education.
- "We need a longer-term solution as well to help people figure out how they're going to pay college costs," Perna said.