Biden cancels $10K in student-loan debt for millions, offering relief as prices soar
A little less loan-ly… Yesterday, President Biden announced plans to cancel $10K in federal loan debt for people making under $125K/year, and $20K for Pell Grant recipients (loans granted after June 30 aren’t eligible). The plan also relieves loan-holding parents, and extends the 2020 payment freeze (yet again). It might face delays because of lawsuits, but it’s expected to happen. As Biden would say, “Here’s the deal”:
- Most of the 45M borrowers who owe $1.6T in loan debt will get relief, with about 15M expected to get their full debt canceled.
- The move’s forecast to cost $300B, but the true cost could be less because billions in defaulted debts likely wouldn’t have been repaid anyway.
Mixed response… Since Biden campaigned on the promise of loan forgiveness, it’s a victory ahead of midterms. But some don’t love it:
- Critics worry the plan will exacerbate inflation and penalize those who paid off their debt. Economists say it’s unlikely to boost short-term inflation since loan payments have been paused since March 2020.
- Supporters say it’ll help money-strained Americans get by, but progressives want cancellation of all $1.6T in student debt.
It’s a big relief, but not a long-term one… US student-loan debt is higher than credit-card debt, so Biden’s plan will significantly relieve Americans’ IOU stress. But it’s not a long-term fix for college affordability. Tuition’s jumped 5X more than inflation in the past half century, and economists worry college could hike tuition even more if students expect forgiveness. Loans will likely pile up again, though Biden says he wants to improve loan requirements to prevent ballooning.