President Biden announced a sweeping plan for student loan forgiveness in late August. (Prachatai/Flickr).
President Biden made an announcement to forgive student loan debt for Americans in late August, fulfilling a long-awaited campaign promise. The plan, which has varying levels of aid for borrowers of different incomes, could help over 40 million Americans reduce their student loan debt. In an official statement by the White House, President Biden outlined his three-part plan to help lower and middle class Americans recover financially from loans in conjunction with the Department of Education. Many see the plan as a way for young Americans in debt to rectify their financial status, especially as pandemic-era freezes for student loans end. Biden’s plan, however, was met with both assent and criticism.
What does the legislation do?
The rising cost of higher education has caused the public opinion of colleges and universities to fall in recent years. According to Pew Research Center, only half of American adults think that colleges and universities have a positive impact on the nation. Since 1980, the total cost of both four-year public and four-year private college has nearly tripled, even after accounting for inflation. During the pandemic, some who planned on attending college delayed or suspended plans as colleges increased tuition costs.
With the increasing cost of universities leading to larger loans, some graduates have student loan debt in the six figure range. About 7% of people with federal student loan debt owe more than $100,000, the Washington Post reports.
Biden’s plan will eliminate up to $10,000 of federal student loan debt for Americans who make under $125,000 a year and families that make less than $250,000. Those who received federal Pell Grants are eligible for another $10,000 in loan forgiveness. The plann also cuts monthly loan debt payments in half for undergraduate loans, from 10% of discretionary income to 5%. The amount of income considered non-discretionary will rise, and loan balances will be forgiven after 10 years of payments instead of 20 years. 20 million Americans could have their student loan debt erased completely by this plan, according to the Biden administration. The administration will also fight to keep tuition costs low, the plan promises, and increase the amount of Pell Grants given to low-income students.
“Both of these targeted actions are for families who need it the most: working and middle-class people hit especially hard during the pandemic,” Biden said in the announcement of the plan.
For many, Biden’s plan is seen as a victory for younger generations who are saddled with immense student loans. According to the New York Federal Reserve, sixty seven percent of borrowers are under the age 40. Laniece McCalla, a cosmetology student from New York, stated, “I can even plan for a house. It just is opening my eyes to possibilities now. Whereas before, it was just almost like, when is that hammer going to drop?”.
Many young Americans took to social media to express excitement and relief follwing Biden’s announcement of loan forgiveness. TikTok user @egrzon posted a video saying “When you find our the Pell Grant kids get an additional $10,000 - love being poor today!”. The post received nearly 100,000 likes, with many comments expressing relief and gratitude for Biden’s plan.
However, Biden’s plan was not popular amongst some. A letter signed by nearly half of American governors expressed fear that low-income Americans would be forced to bear the debt of wealthier doctors, lawyers, and professors.
The letter stated: "College may not be the right decision for every American, but for the students who took out loans, it was their decision: able adults and willing borrowers who knowingly agreed to the terms of the loan and consented to taking on debt in exchange for taking classes. A high-cost degree is not the key to unlocking the American Dream—hard work and personal responsibility is."
The letter also expressed concerns that Biden’s plan could backfire for future students if colleges decided to increase tuition costs, worsening inflation instead of lessening its effects. The letter also questioned if Biden had the authority to enact such sweeping plans, stating “As president, you lack the authority to wield unilateral action to usher in a sweeping student loan cancellation plan”.
U.S. Secretary of Education Miguel Cardona stated that the loan forgiveness plan primarily aimed to lessen the effects of the COVID-19 pandemic on borrowers, and he hopes the plan will encourage more Americans to pursue higher education. The effects of Biden’s plan on students and the economy are yet to be seen.
Sources & Further Reading