Biden announces $10K in student loan debt cancellation

President Joe Biden on Wednesday announced that his administration will provide $10,000 in student debt cancellation for borrowers who earn less than $125,000 a year, or families who earn less than $250,000—providing a huge boost for college students and graduates as the cost of tuition grows.

Low-income students who qualify for Pell grants will receive an additional debt cancellation of $10,000, the administration said.

The interim chancellor of the Cal State University system said in a statement Wednesday that nearly half of the system’s students qualify for Pell grants.

“Reducing the burden of debt for our students is another critical step to ensure that they start their careers on solid financial footing,” Jolene Koester, the interim chancellor, said.

The average debt of a CSU graduate with a bachelor’s degree is $17,367, according to financial aid figures from the CSU.

More than 43 million people nationwide have federal student debt, with an average balance of $37,667, according to federal data. Nearly a third of borrowers owe less than $10,000, and about half owe less than $20,000.

Pell grants, which do not have to be repaid, provided a maximum of $6,500 for eligible students for the 2021-22 academic year, and Koester in her statement advocated doubling that to $13,000.

Biden said in remarks at the White House Wednesday that he hoped to target families who need the help the most, including middle-class people hit hard financially during the pandemic.

He also announced Wednesday that the pause on federal student loan payments has been extended once more, for the “final time,” through the end of 2022, according to the Associated Press. The latest extension of the pandemic-era payment freeze came just days before the Aug. 31 expiration date the administration announced in April.

The White House emphasized that no one in the top 5% of income-earners would see any loan relief.

But top Republicans were not persuaded.

Senate GOP leader Mitch McConnell said, “President Biden’s inflation is crushing working families, and his answer is to give away even more government money to elites with higher salaries. Democrats are literally using working Americans’ money to try to buy themselves some enthusiasm from their political base.”

The administration said the Education Department would release information in coming weeks for eligible borrowers to sign up for debt relief. Cancellation for some will be automatic, if the department has access to to their income information, but others will need to fill out a form.

Current students would be eligible for relief only if their loans were originated before July 1, 2022. Biden is also proposing capping the amount that borrowers must pay monthly on undergraduate loans at 5% of their earnings, down from 10% previously. The Education Department is to post a proposed rule to that effect, which would also cover the unpaid monthly interest for borrowers who remain current with their monthly payments—even when the payments are $0 because their incomes are low.

The Associated Press contributed to this report. 

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