President Joe Biden announced the cancellation of federal student loans on Wednesday and will waive $10,000 for students earning $125,000 or less a year, a plan that could make government estimates 300 billion dollars shows.
Biden said the plan would extend the student loan pause by four months, which would be the last, with repayments to begin again in January, Biden said in Wednesday’s announcement. .
The act also applies another $10,000 cancellation, totaling $20,000, to students who are recipients of Pell grants.
“In keeping with my campaign promise, my Administration is announcing a plan to give working and middle-class families breathing space as they prepare to resume federal student loan payments in the coming months. January 2023,” Biden tweeted while announcing the plan.
The plan will also cut the monthly student loan payment in half, millions of loans to qualify for the reduction
The plan also aims to reduce monthly student loan payments by 50 percent and fix the Public Service Loan Forgiveness program, and make the current student loan system more manageable. for both current and future borrowers.
The proposed federal rule would change income-based repayment on student loans and cut in half the amount borrowers would have to pay monthly on college loans. them, “while borrowers with both undergraduate and graduate loans will pay the weighted average.”
Meanwhile, the Department of Education plans to release details on how loans can apply for this loan in the coming weeks, according to the report. CNN.
The app is expected to be available by the end of December, when the refund pause ends.
The organization reports that millions of loans will automatically qualify for forgiveness based on existing income data.
Last month, thousands of students took to Washington DC to call for student debt cancellation.
Cancellation of Student Debt Could Cost the Federal Government $300 Billion, Estimates Show
While canceling student debt will provide financial relief to millions of Americans, the ultimate cost will fall to the federal government.
CNN reports that the plan could cost Uncle Sam $300 billion, citing an estimate from The Penn Wharton Budget Model. To put that into context, there is currently $1.6 trillion in outstanding federal student loan debt.
The Federal Budget Committee has stated that the outstanding debt will return to that level in just 4 years if $10,000 is canceled for each borrower, which does not further reduce the amount received. Pell’s subsidy.
Canceling the loan also doesn’t address the real root of the problem, which is the cost of college and university education.
Since coming to power, Biden has long faced political pressure from the left, from Senate Majority Leader Chuck Schumer and Senator Elizabeth Warren of Massachusetts, to cancel his student loan debt. pellets.
Biden announces cancellation of student loans amid political pressure from the left
Schumer and Warren had previously called on Biden to cancel $50,000 for each borrower, CNN reported.
On Tuesday, Biden met with the two, along with Democratic Senator Raphael Warnock of Georgia, the day before his announcement.
Schumer and Warren released a joint statement calling the move “a giant step forward in resolving the student debt crisis.”
“The positive effects of this move will be felt by families across the country, especially in minority communities, and is the most effective action the President can take on his own to help. supporting working families and the economy,” they added.
Meanwhile, Marc Goldwein, senior vice president and policy director for the Federal Budget Committee responsible, said the plan would likely increase inflation and undermine the goals of the Act. Democrat Inflation Reduction.
Last week, Biden similarly announced it would cancel $3.9 billion in additional student loan debt for the more than 200,000 students attending the ITT Institute of Engineering, Shade room reported.
