Why is the Biden administration forgiving student debt?
This week Joe Biden announced debt relief worth billions of dollars for struggling graduates.
Published On 6 Oct 20236 Oct 2023
US President Joe Biden has announced a new round of federal student loan forgiveness to address the “unsustainable debt” that borrowers accumulate to complete their college education.
This move aims to help 125,000 borrowers by clearing $9bn in debt through existing programmes. Since Biden took office in 2021, a total of 3.6 million borrowers will have had $127bn in debt wiped out.
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“We’re not done yet,” Biden said in the Roosevelt Room at the White House on Wednesday.
Here’s what you need to know about the loan forgiveness:
Why did Biden announce this now?
Student loan repayments restarted this month after being frozen since the COVID pandemic, and the Biden administration has adjusted earlier proposals that were rejected, to help relieve student debt.
Biden has talked about pushing through reforms to education since he took office in 2021. He has said he would like make it easier for Americans to get a degree by making undergraduate programmes free, but will first tackle the debt graduates are already facing. Collectively, they owe $1.76 trillion.
Earlier in the year, the US government tried to cancel amounts of up to $20,000 for 40 million borrowers, but his move was rejected by the Supreme Court, which argued that Biden lacked the authority to push through such measures without approval from Congress.
The court’s Chief Justice John Roberts stated: “The question here is not whether something should be done; it is who has the authority to do it.”
Are debts being completely written off?
Yes, for some.
Teachers and social workers will be among the 53,000 borrowers who qualify for complete debt relief as will others enrolled in Public Service Loan Forgiveness programmes. In total, they will get $5.2bn in debt forgiveness, according to the Education Department.
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People in income-dependent relief schemes, including an estimated 51,000 borrowers owing, in total, up to $2.8bn and those who are disabled borrowers with a permanent disability, making up 22,000 people owing $1.2bn.
What else is being offered?
The Biden administration plan is also offering lower monthly debt repayments for those on lower incomes.
Biden announced, “No one with an undergraduate loan today or in the future, whether a community college or a four-year college, will have to pay more than 5 percent of their discretionary income to repay these loans.”
How much has the cost of higher education increased in the US?
In 1980, it cost $10,231 a year on average for an undergraduate programme, but by 2020, it cost $28,775. Government financial grants for those most in need, known as Pell grants, have not risen to meet the increase in fees. This has led to more people taking out student loans to cover costs.