President Biden announced that his administration will cancel $10,000 in student loan debt for federal borrowers and $20,000 for Pell Grant recipients earning less than $125,000 a year. 

It is estimated that one-time debt forgiveness of $10,000 for borrowers earning less than $125,000 per year will cost taxpayers $330 billion over the 10-year budget window. Some estimates are even as high as $400 billion to $600 billion.

The taxpayer-provided debt forgiveness is capped at $20,000 for Pell Grant recipients and $10,000 for the other 40 percent of federal borrowers. To qualify, individuals must have earned less than $125,000 and households less than $250,000 in either the 2020 or 2021 tax years.

The taxpayer-provided relief is estimated to benefit 43 million federal student loan borrowers, 20 million of whom will have their debt completely canceled. Current college students are eligible for the relief, with dependents’ eligibility based on their parents’ income. 

The proposed rule, which will apply to both current and future borrowers, would cut the amount owed under income-driven repayment plans in half from 10 percent of discretionary income to 5 percent. It will also raise the amount of income that is considered non-discretionary to protect borrowers who fall under 225 percent of the federal poverty level — earnings roughly equivalent to a $15 per hour minimum wage — from having to make any payments.

The proposed income-driven repayment rule would also allow borrowers with balances under $12,000 to achieve loan forgiveness in 10 years instead of 20. Unlike current income-driven plans, the forgiveness would cover unpaid interest.

"The changes proposed today will likely cost an astronomical $400-$600 billion. Prior to the announcement, the last two Administrations and Congresses had already spent roughly $300 billion to pause repayments for 29 months and enact a variety of other changes to the student loan system. Including today’s announcement, policymakers will have spent between $700-900 billion on student debt cancellation and relief since the start of the pandemic." (Committee for a Responsible Federal Budget)

Debt Cancellation Accountability Act

In response, Congressman Warren Davidson (R-OH), joined by 12 of his colleagues, introduced the House companion bill to Senator Rick Scott’s Debt Cancellation Accountability Act. This legislation will prevent the Biden administration from enacting blanket student loan forgiveness. If the Department of Education attempts to waive or discharge more than $100,000 in federal student loans for two or more borrowers, this legislation would require them to obtain funding from Congress first.

In Favor of a Forgiveness/Taxpayer Bailout: 

Sen. Schumer (D-NY and Sen. Warren (D-MA) joint statement: "With the flick of a pen, President Biden has taken a giant step forward in addressing the student debt crisis by cancelling significant amounts of student debt for millions of borrowers. The positive impacts of this move will be felt by families across the country, particularly in minority communities, and is the single most effective action that the President can take on his own to help working families and the economy.

“This action, along with the pause on federal student loan payments, interest, and collections will improve borrowers’ economic security, allowing them to invest in their families, save for emergencies, and pay down other debt. In addition, we are pleased to see the President’s proposed work towards greatly simplifying and expanding access to student loan relief programs, including the Public Service Loan Forgiveness program, and look forward to additional improvements to other programs like Income Driven Repayment, which will also allow millions more student loan borrowers to better access existing programs to reduce their student loan debts.

“No president or Congress has done more to relieve the burden of student debt and help millions of Americans make ends meet. Make no mistake, the work - our work - will continue as we pursue every available path to address the student debt crisis, help close the racial wealth gap for borrowers, and keep our economy growing.”

More Information

• White House Fact Sheet
• Use of the HEROES Act of 2003 to Cancel the Principal Amounts of Student Loans

Opposed to a Forgiveness/Taxpayer Bailout:

Congressman Ken Calvert (R-CA): “President Biden’s decision to arbitrarily forgive up to $20,000 in student loan debt for families making up to a quarter million dollars is unfair and inflationary. This move is a slap in the face of any family that saved for their child’s education or any college graduates who worked tirelessly to pay off their student loans. It’s also outrageous to ask the millions of hard-working Americans who didn’t go to college to pony up the tax dollars to cover the costs of sending the children of upper-middle class families to college.

This debt won’t magically disappear, it will be paid for by taxpayers to an estimated tune of more than $300 billion dollars, with outstanding student loan debt projected to return to its current level of $1.6 trillion in just four years. Once again, the Biden administration is advancing massive amounts of inflationary spending on the backs of American taxpayers to transfer money to its favored political supporters. This game of picking winners and losers is wrong and it’s propelling our economy deeper into a recession.

President Biden’s plan does nothing to address the root problem, which is the rising cost of a college education. Since 1980, the average cost of a college education has risen by 1,200%. Instead of helping to curb those costs, today’s announcement will have the opposite effect and raise tuition rates across America.” 

More Information

• Biden's Student Loan Giveaway to the Wealthy
• CBO Confirms: Biden’s Biggest Executive Actions Come with $532 Billion Price Tag
  

Do you think a President has the authority to unilaterally "forgive" student loan debt?

Do you think Congress should suspend or forgive student loan debt?