How Biden’s student loan debt plan will help Americans
Photo by Andre Hunter on Unsplash
More than 40 million Americans could see their student loan debt reduced — and in many cases eliminated under a new federal plan announced last week.
Fulfilling a campaign promise, President Biden announced a plan that would eliminate up to $10,000 of federal student debt for borrowers earning $125,000 a year or less, and erase $20,000 in debt for Pell Grant recipients.
Biden’s plan makes 43 million borrowers eligible for some debt forgiveness, with 20 million who could get their debt erased entirely, according to the administration. About 60% of borrowers are recipients of federal Pell Grants, which are reserved for undergraduates with the most significant financial need, meaning more than half can get $20,000 in relief.
Nearly 90% of relief will go to people earning less than $75,000, according to White House estimates.
“That’s 20 million people who can start getting on with their lives,” Biden said when announcing the plan. “All this means people can start to finally crawl out from under that mountain of debt. To get on top of their rent and utilities. To finally think about buying a home or starting a family or starting a business.”
The cancellation applies to federal student loans used to attend undergraduate and graduate school, along with Parent Plus loans. Current college students qualify if their loans were issued before July 1. For dependent students, their parents’ household income must be below $250,000.
Most people will need to apply for the relief. The Education Department has income data for a small share of borrowers, but the vast majority will need to prove their incomes through an application process. Officials said applications will be available before the end of the year.
“Both of these targeted actions are for families who need it the most: Working- and middle-class people hit especially hard during the pandemic,” said Biden
The plan has received mixed reactions.
Republicans denounced the plan as an insult to Americans who have repaid their debt and to those who didn’t attend college.
The GOP criticism is cynical politics and an unsubtle attempt to make Americans resentful of one another.
Some question the administration's authority to cancel student loan debt. The Justice Department released a legal opinion concluding that the Higher Education Relief Opportunities for Students Act gives the Education secretary the “authority to reduce or eliminate the obligation to repay the principal balance of federal student loan debt.”
The legal opinion also concluded that the forgiveness could be applied on a “class-wide” basis in response to the coronavirus pandemic, a national emergency.
Still legal challenges are expected. The Job Creators Network, which promotes conservative economic policies, said it was considering legal options, with president and CEO Alfredo Ortiz calling the president's effort “fundamentally unfair” to those who never took out loans for college.
Some oppose Biden's decision to impose an income cap and argue that adding the detailed application process to verify incomes could deter some borrowers who need help the most.
The Biden administration was right to impose the income cap. There had to be a limit. The plan cannot be perceived as a debt cancellation handout for affluent borrowers.
While the plan is not perfect, it should help Black and brown students who are more likely to take out federal student loans and at higher amounts than their white peers. It should also help first generation college grads of all races and ethnicities who were told that getting a degree would be their ticket to the middle class.
The NAACP said the plan is “one step closer” to lifting the burden of student debt. The civil rights organization had pressed Biden to cancel at least $50,000 per person.
NAACP president Derrick Johnson urged Biden to cancel the debt quickly and without bureaucratic hurdles for borrowers.
This one-time, limited debt cancellation plan does not solve the underlying problem of rising college costs. More needs to be done to make college more affordable.
If given a grade the plan should be given an incomplete.
It's a great first step but it is not enough.
Irv Randolph is the managing editor of the Philadelphia Tribune, the nation’s oldest continuously published African American newspaper in the nation and co-founder of The Randolph Report, a newsletter on politics, culture and career and professional news relevant to Black Americans.