Biden Cancels Student Loans

Good morning everyone. I’m Michele Carroll and welcome to the News Diet where I’ll give you daily news bites in under 10 minutes. Today I’m gonna talk about President Biden’s student loan forgiveness announcement. Let’s be informed so we can get on with our day.

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Yesterday President Biden announced another student loan forgiveness plan, but this one is much bigger than the rest. Because this is a big announcement with a lot of strong opinions on all sides, I’m going to give you the facts of the loan cancellations, and then what supporters and opponents are saying about it.

So Biden’s plan is to cancel $10,000 of federal student loan debt for borrowers earning $125,000 a year or less. For couples, this would be $250,000. For Pell Grant recipients, this amount goes up to $20,000. Pell Grants are grants given to undergraduate students who show they’re in great financial need and have yet to receive a degree. This plan is for those who borrowed federal loans, and is not eligible for private loans. Also, Biden announced the extension of the loan repayment pause through the rest of the year, when it was supposed to end at the end of this month. This pause on student loans was first put in place at the beginning of the pandemic to give borrowers relief while many industries and jobs were on the line. According to a model created by the Wharton School at the University of Pennsylvania, this plan will cost between $300 billion to $980 billion depending on future developments. And also that around 70% of recipients will be from households in the top 60% of income distribution. In terms of applying for this relief, borrowers already on an income-driven repayment plan may receive theirs automatically, since the Education Department already knows your income. But for everyone else, the White House has said that an application process should be in place maybe by the end of the year.

In total, more than 43 million Americans have federal student loan debt of $1.6 trillion, with almost a third owing less than $10,000, and more than half owing less than $20,000. 7% of borrowers owe over 6 figures. Biden has already canceled about $32 billion of the $1.6 trillion by expanding current forgiveness programs for public sector workers, disabled workers, and students who were defrauded by for-profit colleges, which I actually talked about in one of last week’s episodes.

Supporters of this plan say that these cancellations will provide relief for millions of Americans who have been shackled by their student loan debt. That for many, they were sold the false promise of a flourishing career should they get a degree, and that therefore they should get one at any cost, which they did, to later find out that it wasn’t as rosy as they were sold. Some advocates have even called these loans unjust and that many borrowers have been held back in life because of their payments, preventing them from buying homes, investing, or saving. They also say that programs like this could make education cheaper for students in the future considering the repayment cap, which caps the amount that people need to repay based off their monthly incomes - which Biden is proposing to cut in half from 10% to 5%. For some cancelation advocates, this plan isn’t enough - citing how many borrowers are struggling under much bigger amounts than just $10 or $20,0000. 

Now opponents of this plan say that lowering or canceling the debt of tens of millions of Americans is unfair for other borrowers who made sacrifices to pay off their loans, or even decided against attending college due to the cost. They say that forgiving loans already taken out doesn’t even address the root of the problem, which is skyrocketing college tuitions. According to an analysis by Visual Capitalist using data from the US Bureau of Labor, the years 1980 to 2020 saw the cost of obtaining a degree increase by 1200%, while inflation went up just 236%. So skeptics are wondering why that’s not being addressed instead. In fact, some are wondering if this just makes the problem worse, as maybe it could give universities the impression that they can raise costs if students think they’ll just get their loans canceled in the future. Many opponents are also pointing to the current inflation issue. By wiping out hundreds of billions of dollars of debt payments, that’s now hundreds of billions of dollars that may be injected back into the economy - which is usually opposite of what economists want when trying to get consumer spending down. And then lastly, they’re pointing to the national debt, which is currently over $30 trillion, and how canceling this much money could be contributing to this massive number. 

So, this announcement was just made yesterday. There’s a lot of details still to be hammered out, so I’ll be back when they are.

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You’ve just been informed so now it’s time to get on with your day. I’m Michele Carroll. Thanks so much for listening.

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#studentloans
#studentloanforgiveness
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Welcome to The News Diet.
Hosted by Michele Carroll.

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https://www.cnn.com/2022/08/24/politics/biden-student-loan-forgiveness-qualify/index.html

https://studentaid.gov/understand-aid/types/grants/pell

https://www.nytimes.com/2022/08/24/business/biden-student-loan-forgiveness.html

https://www.foxnews.com/politics/biden-announces-student-loan-handout-national-debt-soars

https://www.foxbusiness.com/economy/student-loan-deal-could-cost-900b-favor-wealthy-americans-analysis-shows

https://thehill.com/homenews/administration/3611977-biden-cancels-some-student-loan-debt-extends-pandemic-payment-pause/

https://www.washingtonpost.com/education/2022/05/22/student-loan-borrowers/

https://budgetmodel.wharton.upenn.edu/issues/2022/8/23/forgiving-student-loans

https://www.forbes.com/sites/zackfriedman/2022/05/31/student-loan-forgiveness-is-completely-unfair-to-these-people/?sh=283fd7501035

https://www.visualcapitalist.com/rising-cost-of-college-in-u-s/

https://www.forbes.com/advisor/student-loans/college-tuition-inflation/#:~:text=How%20College%20Prices%20Ballooned%20Over,total%20price%20increased%20to%20%2428%2C775.

https://www.usdebtclock.org/