Biden Announces Student Loan Forgiveness Plan

President Biden said cutting the federal budget deficit will pay for his student loan relief plan.

“I hear it all the time: ‘how do we pay for it?’ We pay for it by what we’ve done; last year, we cut the deficit by more than $350 billion. This year, we’re on track to cut it by more than $1.7 trillion by the end of this fiscal year, the single largest deficit reduction in a single year in the history of America. And the Inflation Reduction Act is going to cut it by another $300 billion over the next decade,” Biden said at the White House.

“I will never apologize for helping … working Americans and middle class, especially not to the same folks who voted for a $2 trillion tax cut that mainly benefitted the wealthiest Americans and the biggest corporations, that slowed the economy, didn’t do a hell of a lot for economic growth, and wasn’t paid for and racked up this enormous deficit,” he said.

Biden then referenced Covid-19 pandemic loan forgiveness to small businesses. “They needed help. It was the right thing to do,” he said.

“The outrage over helping working people with student loans, I think, is simply wrong. Dead wrong,” he added.

In closing his remarks, President Biden touted his student debt relief plan as an action that makes good on his promise to “grow the economy from the bottom up and the middle out.” 

“Because when we do that, everybody does better. Everybody does well. The wealthy do very well. The poor have a way up and the middle class can have breathing room,” he added.

The President said that this plan will help America “remain the most competitive nation in the world with the strongest economy in the world with the greatest opportunities in the world.” 

“That’s what today’s announcement is about, about opportunity, about giving people a fair shot, about the one word America can be defined by — possibilities. It’s all about providing possibilities,” Biden said.

As he walked off, the President did not respond to a question from a reporter in the room who asked what Biden’s message was to people who already paid off their student loan debt.

In addition to forgiving the student loan debt of some borrowers, President Biden said he is also proposing a federal rule aimed at making the student loan system more manageable.

Biden called the proposal an “income driven repayment plan” that he wants to be “simple and fair.” It is aimed at both current and future borrowers, as payments are set to resume after Dec. 31.

“No one with an undergraduate loan today or the future, whether for community college or a four-year college, will have to pay more than 5% of their discretionary income to repay their loan,” he said in remarks from the White House on Wednesday.

Discretionary income is the money left over after paying for necessitates like housing and food, Biden explained. That 5% rate is cut in half from the current 10% payment rate that exists now, he added.

Biden also said that after a borrower pays a loan for 20 years, “your obligation will be fulfilled if it hadn’t already fulfilled — meaning you won’t have to pay anymore, period.”

For those whose original balance was less than $12,000, Biden said these students will be done paying after 10 years.

“These changes will save more than a thousand dollars a year on average for the borrower,” the President said.

President Biden said he knows his federal student loan relief plan will not “make everybody happy.”

He noted that some critics say his plan is addressing too little and some say that the cuts are too much.

“I find it interesting how some of my Republican friends who voted for those tax cuts and others think that we shouldn’t be helping these folks,” he said.

Biden also noted that this plan is part of his administration’s effort to make college more affordable.

“It includes unprecedented investments — nearly $6 billion in historic Black colleges, much of which is focused on pandemic relief to help students cover tuition and other costs so they can stay in school,” he added.

President Biden said his announcement on student loan relief is targeted to help working and middle class Americans.

“These actions are for families who need it the most, working and middle class people hit especially hard during the pandemic making under $125,000 a year. You make more than that, you don’t qualify,” he said.

“No high-income individual or high-income household on top of the 5% — in the top 5% of incomes, by the way — will benefit from this action, period. In fact, about 90% of the eligible beneficiaries make under $75,000 as a family,” Biden continued.

President Biden said his federal student loan relief plan will allow Americans with student debt to look forward to other milestones in life.

“All this means people can finally crawl out from under that mountain of debt to get on top of their rent and their utilities. To finally think about buying a home or starting a family or starting a business,” Biden said in remarks from the White House.

“When this happens, the whole economy is better off,” he added.

President Biden announced his student loan relief plan, stating that he is “honoring” his campaign commitment, during remarks from the White House.

“My campaign for president, I made a commitment that we would provide student debt relief, and I’m honoring that commitment today. Using the authority Congress granted to the Department of Education, we will forgive $10,000 in outstanding federal student loans,” Biden said.

Biden also said that low-income families who qualify for Pell Grants will “have their debt reduced $20,000. Both of these targeted actions are for families who need it the most.”

President Biden is formally announcing his student loan forgiveness plan in remarks from the White House alongside Education Secretary Miguel Cardona.

“Education is a ticket to a better life. … but over time that ticket has become too expensive for too many Americans,” Biden said during his speech. “All this means that an entire generation is now saddled with unsustainable debt in exchange for an attempt at least at a college degree. The burden is so heavy that even if you graduate you may not have access to the middle-class life that the college degree once provided.”

The President’s sweeping plan on student loans follows extended, down-to-the-wire negotiations at the White House among stakeholders and lawmakers ahead of when payments were set to resume at the end of this month.

The decision is already disappointing many, with those on the left arguing that the President should have provided even more loan forgiveness and those on the right asserting that Biden is punishing Americans who avoided going into debt. But it fulfills one of Biden’s campaign promises, issuing major reforms to America’s student loan system and providing relief to millions of current and future borrowers.

Senate Majority Leader Chuck Schumer has been among a handful of top Democrats who have lobbied President Biden for much of his term to cancel student debt.

During the presidential transition, Schumer made the pitch privately to Biden at a Nov. 20, 2020 meeting in Wilmington, Delaware, according to a person familiar with the matter.

The meeting, which included House Speaker Nancy Pelosi, focused on the Democrats’ agenda — and Schumer there made a pitch for Biden to take broad steps to wipe away student loan debt.

Schumer, along with Sen. Elizabeth Warren and other Democrats, continued to make the case to Biden, as they even included a provision in the 2021 American Rescue Plan to make any student loan forgiveness tax free through 2025, a move aimed at pushing the White House to take that step since it otherwise could be considered as taxable income.

The push even continued after the deadly massacre at a Buffalo supermarket, when Biden traveled to the city last May for a funeral for victims of the mass shooting. On Air Force One and on the way back to Washington on May 17, Schumer made the argument to Biden directly that canceling student loan debt was the “right thing to do economically and morally,” the source said.

Some Democrats in tough congressional races are sharply criticizingPresident Biden’s decision on student debt. 

Rep. Tim Ryan – the Ohio Senate Democratic nominee – argued that it “sends the wrong message to the millions of Ohioans without a degree working just as hard to make ends meet.” 

Ryan said Congress should instead pass an “across-the-board tax cut for working- and middle-class families,” cancel “medical debt,”create “targeted forgiveness for essential workers and more opportunities for student borrowers to refinance their loans.”

“Instead of forgiving student loans for six-figure earners, we should be working to level the playing field for all Americans,” said Ryan.

New Hampshire Democratic Rep. Chris Pappas also blasted Biden’s move for raising the deficit without tackling the “underlying issue” of higher education’s high costs.

“This announcement by President Biden is no way to make policy and sidesteps Congress and our oversight and fiscal responsibilities,” said Pappas. “Any plan to address student debt should go through the legislative process, and it should be more targeted and paid for so it doesn’t add to the deficit.”

“The President’s plan also doesn’t address the underlying issue of the affordability of higher education, and it is clear that the high cost continues to limit opportunities available to students,” added Pappas.

Other vulnerable Democrats said they supported Biden’s move, praising him for not yielding to the wish of some progressives to go even further and cancel all student debt.

New Hampshire Sen. Maggie Hassan called the administration’s announcement “a balanced compromise approach that will help those who need it the most.”

President Biden on Wednesday announced his plan to address student loan debt, which includes debt forgiveness for certain borrowersand extending the pandemic-related payment pause.

The Biden administration has already canceled nearly $32 billion of the $1.6 trillion in outstanding federal student debt by expanding existing forgiveness programs for public-sector workers, disabled borrowers and students who were defrauded by for-profit colleges.

Here are details CNN has learned of Biden’s newplan, including how much will be forgiven and who is eligible.

Who qualifies? The plan applies to federal student loan borrowers.

How much forgiveness will they get? The amount of debt canceled depends on whether the borrower received a Pell grant to attend college.A federal Pell grant is only given to undergraduate students who “display exceptional financial need and have not earned a bachelor’s, graduate, or professional degree” and “does not have to be repaid, except under certain circumstances,” according to the Department of Education’s Federal Student Aid office.

Individual borrowers who make less than $125,000 yearly and married couples or heads of households who make less than $250,000 yearly will have up $10,000 of their federalstudent loan debt forgiven if they did not receive a Pell grant as an undergraduate student, per the FSA website.

Individual borrowers who make less than $125,000 yearly and married couples or heads of households who make less than $250,000 yearly but did receive a Pell grant as an undergraduate student will have up $20,000 of their student loan debt forgiven.

What steps do eligible borrowers have to take? Nearly 8 million borrowersmay be able to receive debt forgiveness automatically because the Department of Education already has their income information, FSA says.

The Biden administration will launch an application in the coming weeks for borrowers to provide their income information or if borrowers are unsure if the department has their income information already. FSA says the application will be available before the federal student loan repayment pause ends on December 31.

Borrowers can sign up for updates on when the application is open at the Department of Education’s subscriptions page.

About a third of people in the US with student debt owe more than $40,000.

About 3.7 million people ages 25-34 have loans of between $20,000-$40,000, according to the US Department of Education, with 3.2 million owing $10,000-$20,000.

The amount of household debt made up by student loans has increased from nearly 4% to almost 10% from 2004 to 2022, only decreasing during the Covid-19 pandemic.

President Biden plans to formally announce his plan for forgiving student debt for some borrowers Wednesday afternoon, which includes forgiving $10,000 for borrowers who make less than $125,000 per year and extending the payment freeze one final time.

The announcement has three key 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 making less than $125,000 or $250,000 if they are part of a household. Sixty percent of borrowers, the official said, have Pell Grants, noting that the “majority of borrowers are eligible for $20,000 in relief.” The official said that a “strong majority of borrowers are folks who come from lower income, middle income.”

The federal student debt totaling $1.6 trillion for over 45 million borrowers is a “financial weight on America’s middle class,” a senior administration official said, noting that the burden “falls disproportionally on Black borrowers.” 

The official noted that nearly 90% of those relief dollars “will go to those earning less than $75,000 a year,” and suggested that it will help “narrow the racial wealth gap.” 

Second, the US will also extend the pause on student loan payments “one final time” through Dec. 31, 2022. 

The official also addressed the move’s impact on inflation.

“The President is taking one step that has a negative fiscal impulse, collecting more payments from borrowers, and one step that has a positive fiscal impulse, offering debt relief to borrowers most in need. In terms have an impact on inflation relative today our view is that those steps largely offset. There are certain conditions and assumptions under which it could well be neutral or deflationary,” the official said.

Third, the Department of Education will reform the income-driven repayment system, capping what borrowers pay each month, the official said.

“The President will announce proposed reforms to income-driven repayment so that both current and future low and middle-income borrowers will have smaller monthly payments. The proposed rule for undergraduate loans would cut in half the amount that borrowers have to pay each month from 10% to 5% of discretionary income,” the second official said.

Here’s a look at who benefits from the plan:

Borrowers eager to take advantage of President Biden’s debt relief program will receive more details from the Department of Education in the coming weeks about how to apply, a senior administration official said.

Roughly 8 million of those borrowers may already have their income information on file with the government and could receive debt relief automatically, the official said.

But the remainder will need to fill out a “simple application” showing their income before benefiting from the debt relief, the official said.

A specific date for the application’s launch wasn’t provided.

Reactions are starting to pour in after President Biden announced his plan for forgiving student debt for some borrowers, with some lawmakers praising the plan and others railing against it.

Here’s what Democrats and Republicans are saying:

Senate Majority Leader Chuck Schumer and Democratic Sen. Elizabeth Warren

In an interview with CNN after the announcement, Warren said it was “a great day.”

“My reaction is that this is a great day, and today is the day that the President will announce that about 20 million Americans will never have to make another student loan payment. Another 23 million Americans will have significant relief on their student loans. Look, will I keep fighting for more? Of course I will,” the Democrat from Massachusetts said.

With regards to college affordability, she said “This is the first step: we deal with the debt, we deal with payments going forward and now it is going to be up to Congress to make sure we do more to hold colleges and universities accountable.”

Senate Minority Leader Mitch McConnell

In a statement, the Kentucky Republican said thatBiden’s“policy is astonishingly unfair.”

“President Biden’s student loan socialism is a slap in the face to every family who sacrificed to save for college, every graduate who paid their debt, and every American who chose a certain career path or volunteered to serve in our Armed Forces in order to avoid taking on debt,” he said.

House Speaker Nancy Pelosi

On Twitter, the California Democrat said that Biden’s action is “bold” and “a strong step in Democrats’ fight to expand access to higher education.”

“By delivering historic targeted student debt relief to millions of borrowers, more working families will be able to meet their kitchen table needs as they recover from the pandemic,” she continued.

President Biden announced his plan Wednesday for forgiving student debt for some borrowers.

Tell us what the cancellation of some federal student loan debt means for you. Share your story below:

President Biden willspeak at 2:15 p.m. ET from the Roosevelt Room, the White House said. 

Biden said in a tweet earlier today that he would share more on his student loan plan this afternoon. The tweet included a chart confirming CNN reporting on the details of the plan.

CNN reported earlier Wednesday that the proposal will include the cancellation of up to $10,000 in student loans for borrowers making less than $125,000. It will also include substantial assistance for Pell Grant recipients, according to two people familiar with the matter. White House officials were targeting up to $20,000 for Pell Grant recipients, the person said, which would also be pegged to the income thresholds.