www.cnbc.com Open in urlscan Pro
23.32.58.121  Public Scan

URL: https://www.cnbc.com/amp/2022/08/24/biden-expected-to-cancel-10000-in-federal-student-loan-debt-for-most-borrowers.html
Submission: On August 24 via api from US — Scanned from DE

Form analysis 0 forms found in the DOM

Text Content

Business News and Finance
VIEW IN APP
MarketsBusinessInvestingTechPoliticsMake It

Close the sidebar

WATCH LIVE
Personal Finance


BIDEN CANCELS $10,000 IN FEDERAL STUDENT LOAN DEBT FOR MOST BORROWERS

Published Wed, Aug 24 2022 11:37 AM EDTUpdated 2 Min Ago
Annie Nova
@AnnieReporter
WATCH LIVE
KEY POINTS
 * President Joe Biden announced he will forgive $10,000 in federal student debt
   for most borrowers, delivering financial relief to millions of Americans.
 * Biden will cancel up to $20,000 for recipients of Pell Grants.
 * Nearly 45% of borrowers, or almost 20 million people, would have their debt
   fully canceled, according to the White House.



President Joe Biden announced Wednesday that he will forgive $10,000 in federal
student debt for most borrowers, fulfilling a campaign pledge and delivering
financial relief to millions of Americans.

Biden will cancel up to $20,000 for recipients of Pell Grants.



"Both of these targeted actions are for families who need it the most," the
president said in remarks from the White House on Wednesday afternoon.

The relief will be limited to Americans earning under $125,000 per year, or
$250,000 for married couples or heads of households. The relief is also capped
at the amount of a borrower's outstanding eligible debt, per the Education
Department.

The president will also extend the payment pause on most federal student loans
"one final time" through Dec. 31, 2022, according to the tweet.

In his remarks, Biden said that 95% of borrowers would benefit from the plan, or
about 43 million people. Of those, over 60% are Pell Grant recipients.

In all, nearly 45% of borrowers, or almost 20 million people, would have their
debt fully canceled, Biden said.



"That's 20 million people who can start getting on with their lives," Biden
said.

"All of this means people can start finally to crawl out from under that
mountain of debt. To get on top of their rent and their utilities. To finally
think about buying a home or starting a family or starting a business."

Biden's decision to move ahead with $10,000 in student debt cancellation for
borrowers who earn under $125,000 will cost the federal government around $244
billion, according to higher education expert Mark Kantrowitz. The $20,000 in
relief for Pell Grant recipients may add around $120 billion to the government's
costs.

The unprecedented action by the White House of wiping out hundreds of billions
of dollars in consumer debt follows years of advocacy pressure and recent months
of heated debate among Biden administration officials.

Those discussions centered on how student loan forgiveness might impact the high
inflation hitting Americans' wallets, the amount of student debt that should be
canceled and if the president even had the power to reduce people's balances
without the legislative branch. 

More from Personal Finance:
What to know about Biden's forgiveness plan: How it works, when to apply
Timeline: Key events on the path to student loan forgiveness
Student loan payment pause extended through December. What to know
Here's what President Biden's student loan forgiveness means for your taxes
Biden's student loan forgiveness plan draws pushback from lawmakers and consumer
groups
Biden's student loan forgiveness will cost taxpayers, prompt inflation: Experts

Looming November midterm elections added pressure on the administration to
arrive at a decision. Advocates have said that forgiving student debt will
galvanize younger voters, among whom Biden has been losing popularity, to the
polls.

Although the president had been pushed to cancel $50,000 or more per person,
including by Senate Majority Leader Chuck Schumer, D-N.Y., and groups such as
the NAACP, he had repeatedly expressed reluctance to wipe out that much debt for
all borrowers.



When the coronavirus pandemic hit the U.S. in March 2020 and crippled the
economy, the Trump administration put federal student loan payments on pause.
That pause has since been extended six times, and Biden's White House chief of
staff, Ron Klain, said earlier this year that the president would make his
decision on student loan forgiveness before payments resume in September.


STUDENT LOAN BORROWERS COLLECTIVELY OWE $1.7 TRILLION

"The student loan crisis" has become a familiar term in the mouths of
politicians and in households across the U.S.

More than 40 million Americans are in debt for their education, owing a
cumulative $1.7 trillion, a balance that far exceeds outstanding credit card or
auto debt. Skyrocketing higher education costs coupled with stagnant wages have
caused the amount of student debt people graduate with to soar. Today the
average balance is over $30,000, up from $12,000 in 1980.



Before the pandemic, when the U.S. economy was enjoying one of its healthiest
periods in history, problems plagued the federal student loan system.

Only about half of borrowers were in repayment in 2019, according to an estimate
by Kantrowitz. A quarter — or more than 10 million people — were in delinquency
or default, and the rest had applied for temporary relief for struggling
borrowers, including deferments or forbearances.

These grim figures led to comparisons to the 2008 mortgage crisis. 

"The student loan system is broken," said Persis Yu, policy director for the
Student Borrower Protection Center.

Click here to view interactive content


PRESSURE TO CANCEL STUDENT DEBT IN A 'BROKEN' SYSTEM

Democrats and Republicans have pointed to major flaws in the federal student
loan system. Problems come into play as soon as students take out loans, experts
say, and more crop up in repayment. Among them:

 * Hundreds of thousands of students have been provided federal loans at
   colleges they say turned out to be predatory and deceptive, leaving them with
   high debt and poor job prospects.

 * The lenders that contract with the U.S. government have been accused of
   misleading borrowers and steering them into unnecessarily expensive and long
   forbearances. 

 * One of the most popular federal programs, Public Service Loan Forgiveness,
   has not yet led to the debt forgiveness that over a million borrowers were
   relying on because of confusing rules and lenders failing to keep track of
   their payments.

 * Extraordinary collection powers by the federal government means that hundreds
   of thousands of veterans and older Americans who have fallen behind on their
   student loans have had portions of their benefits regularly garnished.  

Research shows that student debt holds individuals back from starting
businesses, saving for their retirement and buying homes. 

As a result, debt forgiveness is likely to change the life trajectory for tens
of millions of Americans. 


HOW MOMENTUM BUILT FOR STUDENT LOAN FORGIVENESS

Calls for broad student loan forgiveness date back to the Occupy Wall Street
movement in 2011, shortly before outstanding education debt surpassed $1
trillion.

At the time, advocates began to question why corporations should get a bailout
from the government on their debt but not everyday Americans who had sought an
education.

In the 2020 Democratic primary, Sen. Elizabeth Warren, D-Mass., rolled out a
plan to forgive $50,000 for almost all borrowers on her first day in office as
president. Sen. Bernie Sanders, I-Vt., went further, promising to cancel all of
the debt if he made it to the White House.

On the campaign trail, Biden took a more conservative approach than his rivals
to the left, coming out in support of $10,000 in student loan forgiveness. In
office, however, the president has been under relentless pressure from Democrats
and advocates to deliver deeper relief. 

Wisdom Cole, national director of the NAACP's youth and college division, had
said that nixing just $10,000 would be "a slap in the face" for Black borrowers,
who often have to borrow more than their white peers because of the racial
wealth gap. 




CRITICS SAY FORGIVENESS IS 'SENDING THE WRONG MESSAGE'

The announcement is sure to aggravate many Americans, including those who never
borrowed for their education or went to college. Rep. Kevin Brady, R-Texas,
ranking member of the House Ways and Means Committee, recently called student
loan forgiveness "a giveaway to highly educated college grads." Some Republicans
have said they will try to block an effort by the president to cancel the debt.

Critics of student loan forgiveness have questioned the fairness of directing
relief at those who have benefited from a college education, which usually leads
to higher wages.

"Economists generally agree that widespread loan cancellation is regressive,
delivering the biggest bailout to those who need it the least," said Beth Akers,
a senior fellow at the center-right American Enterprise Institute.

Forgiveness will only worsen the lending crisis, Akers added.

Americans may borrow and pay more for college as a result.
Beth Akers
senior fellow at the American Enterprise Institute.

"The president is sending the wrong message to future borrowers who will likely
expect their own bailout in the future," she said. "Americans may borrow and pay
more for college as a result."

Yet advocates have said that framing student loan forgiveness as a handout to
the well-off is a misinterpretation of the deep and historic inequities of the
American economy.

Mushrooming tuition prices coupled with stagnant household wages over the last
40 years, they argue, have forced more and more families to borrow to attend
college, an increasingly necessary step to reach the middle class.



"All of these fat cats and people who never want to see help for working people
and poor people come up with these myths," Schumer said in June, in one of his
many pushes for $50,000 in student debt cancellation.

"This is not a problem that concerns the wealthy," Schumer said.

Watch our live stream for all you need to know to invest smarter.
Trending Now
 * 1
   Biden cancels $10,000 in federal student loan debt for most borrowers
 * 2
   30-year-old makes $114,000/month in passive income: ‘4 businesses you can
   start for $99 or less'
 * 3
   Here's what President Biden's student loan forgiveness means for your taxes
 * 4
   Georgia cops respond to 'swatting' call at home of Rep. Marjorie Taylor
   Greene
 * 5
   10 companies that will let you work from anywhere and are hiring now

View the full site


A circle with an upward arrow icon.Back to Top

© 2022 CNBC LLC. All Rights Reserved. A Division of NBCUniversal

Data is a real time snapshot *Data is delayed at least 15 minutes. Global
Business and Financial News, Stocks, Quotes, and Market Data, and Analysis.

Privacy Policy Do Not Sell My Personal Information CA Notice Terms of Service

Data also provided by