President Biden announced on Wednesday that he would cancel $10,000 in student loan debt for those earning less than $125,000 per year, with an additional $10,000 for those who had received Pell grants for low-income students, providing economic relief for tens of millions of Americans.
Students who received Pell grants will be eligible for $20,000 in debt forgiveness.
Around 60 percent of borrowers have received Pell grants, and the majority come from families making less than $30,000 a year. The Education Department estimates that 27 million borrowers will qualify for up to $20,000 in relief.
Millions of other borrowers will be eligible for $10,000 in debt relief, as long as they earn less than $125,000 a year or are in households earning less than $250,000. 90 percent of the relief will go to households earning $75,000 a year or less.
There was very little objection to the forgiveness of 10.2 million Paycheck Protection Program (PPP) loans issued as of July 2022, with $72,500 being the average dollar amount forgiven.
White House National Economic Council Director Bharat Ramamurti told reporters that “87% of the dollars…are going to people making under $75,000 a year, and 0 dollars, 0%, are going to anybody making over $125,000 in individual income.”
Compare this plan “to what the Republican tax bill did in 2017. It’s basically the reverse. Fifteen percent of the benefits went to people making under $75,000 a year, and 85% went to people making over $75,000 a year. And if you zoom in even more on that, people making over $250,000 a year got nearly half of the benefits of the GOP tax bill and are getting 0 dollars under our [plan].”
Remind people who say, “My father repaid my college loans,” those loans rarely reached the levels involved in the President’s program.
In the 1989-90 academic year, tuition at the average public 4-year institution was $1,780. In 1999-2000, tuition at a public 4-year institution averaged $3,349.
Between 1989-90 and 1999-2000, the total cost of attendance (fees, tuition, room, and board) increased 66.3% at public 4-year schools, from $4,975to$8,274.
In 2022, The average tuition for 4-years public institutions is $10,440 for in-state and $26,820 for out of state colleges. The average tuition for 4-years private, non-profit, institutions is $36,880. The average overall cost of a Bachelor's degree per year is $30,500.
“This is going to be impactful for women across the country,” White House deputy communications director Kate Berner said in an interview yesterday.
Women hold two-thirds of student debt in the U.S., according to the American Association of University Women, with an average balance of $31,276. Factor in the gender pay gap that widens as women age, become parents, and progress in their careers, and women take about two years longer than men to repay their student loans.
Because of the wealth gap between white and Black Americans—the average white family has ten times the wealth of the average Black family—more Black students borrow to finance their education. The President’s plan will especially help Black America. For many, it will stop generational poverty and permit recipients to move forward, reaping financial rewards from their hard won college education, making America a stronger nation.
People can start finally to climb out from under that mountain of debt,” Biden said in a speech yesterday. “To finally think about buying a home, or starting a family or starting a business. And by the way, when this happens the whole economy is better off.”
President Biden isn’t just forgiving a set amount of debt. He is also enacting a policy that ends excess interest on student loans—as long as a borrower pays their minimum monthly payment (capped at 5% of the loan owner’s disposable income after main bills and necessities like gas and electric). The same program was in place under Obama/Biden but Betsy DeVos and Trump eliminated the cap. President Biden has reinstituted it.
The C.E.O. of the National Housing Conference, David Dworkin, called the initiative “one of the most consequential administrative actions for housing in a generation,” and said it could bring millions of new home buyers into the market.
(This post includes information from the Roundup, Heather Cox Richardson’s Letters from an American, The DealBook and The Broadsheet).
Annette Niemtzow, August 25, 2022.