The current moratorium on student loan payments, which was supposed to expire on August 31st, has been extended by President Joe Biden.
Biden announced the moratorium’s “last period” extension through December 31, 2022, in a tweet on Wednesday.
To no one’s surprise, the White House also announced a long-awaited executive action that will forgive up to $10,000 in federal student debt for students with annual incomes of less than $125,000 (or $250,000 for married couples).
The president has also declared that all outstanding student loans for those who have received a Pell grant will be forgiven, up to a maximum of $20,000. He promised to provide more information at a press conference on Wednesday afternoon.
Undergraduate loan borrowers will be able to pay no more than 5% of their discretionary income per month.
The Wall Street Journal stated that 15 million borrowers, or nearly a third of the 45 million Americans who together owe approximately $1.7 trillion in federal student loans, might have their debts completely eliminated under the forgiveness program.
“In keeping with my campaign commitment,” Biden stated, “my Administration is proposing a proposal to offer to work- and middle-class families breathing room as they prepare to resume repayment of federal student loans in January 2023.”
On the topic of canceling student loans, Americans are split. 30% of individuals are against any sort of student loan forgiveness, and 59% are worried it will make inflation worse, according to a CNBC/Momentive poll from last week.
Republican lawmakers have suggested the president doesn’t have the power to forgive billions of dollars in student loans, while Democratic lawmakers have demanded debt relief of at least $50,000.
Mitt Romney, a Republican senator, presented a bill to prevent Vice President Biden from forgiving debt, but the bill died in the Senate, which is currently controlled by the Democrats.
Missouri Republican Rep. Jason Smith, who serves on the House Budget Committee, tweeted early Wednesday morning, “Canceling student loan debt is simply another giveaway to the wealthy by Washington Democrats.”
Smith continued, “And 87% of Americans who don’t have school debt will be compelled to pay for the 13% who choose to take on student loans.”
The one-time debt forgiveness of $10,000 per borrower, as estimated by a Wharton School of Business study model, will cost taxpayers roughly $300 billion over the next decade.