President Biden plans to formally announce a plan to eliminate student debt for some borrowers Wednesday afternoon, including a $10,000 forgiveness for borrowers making less than $125,000 a year and an extension of the closing date. final payment tape.
The announcement has three main parts, the official said:
First, it includes $20,000 debt cancellation for borrowers who received Pell Grants while they were in college. That applies to borrowers earning less than $125,000, or $250,000 if they’re part of a household. According to the official, 60% of borrowers have Pell Grants, noting that “the vast majority of borrowers qualify for a $20,000 relief.” The official said that “the majority of borrowers are people from lower, middle income”.
A senior US administration official said $1.6 trillion in federal student debt for more than 45 million borrowers is a “financial burden on America’s middle class”. .
The official noted that nearly 90% of that relief dollars “will go to people earning less than $75,000 a year,” and suggested that it will help “close the gap between rich and poor between races.” ethnicity”.
Second, the US will also extend the “one final” student loan payment pause through December 31, 2022.
The official also addressed the impact of the move on inflation.
“The president is taking a step with negative fiscal impulse, collecting more payments from borrowers and a step with positive fiscal impulse, offering debt forgiveness to the borrowers most in need. In terms of the impact on relative inflation today, our view is that those moves largely offset. There are certain conditions and assumptions under which it can be neutral or deflationary,” the official said.
Third, the Education Department will reform the income-based repayment system, limiting the amount borrowers have to pay each month, the official said.
“The President will announce proposed reforms to income-based repayment so that both current and future low- and moderate-income borrowers will have smaller monthly payments. The proposed rule for college student loans would cut the amount borrowers pay each month in half from 10% to 5% of discretionary income,” the second official said.
Here’s who benefits from the plan:
