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Biden’s Student Loan Forgiveness Plan: Everything You Should Know

President Biden has floated the possibility of erasing some student loan debt for millions of Americans, reviving a campaign promise as he faces mounting pressure from progressives as well as declining approval ratings.

Biden floated the possibility last week of eliminating $10,000 in debt per borrower, likely through executive action. So far, the president has repeatedly extended a moratorium on federal student loan payments, a pause that wast put in place as part of a broader COVID-19 relief measure.

“I am considering dealing with some debt reduction,” Biden said in response to a question at the White House. “I am not considering $50,000 debt reduction. But I’m in the process of taking a hard look at whether or not there will be additional debt forgiveness.”

Here’s everything we know about the plan so far: 

How much per borrower will be forgiven? 

Biden supported “immediately” erasing $10,000 in student debt for most borrowers during his presidential campaign but has raised questions about his legal authority to do so via executive order. 

Progressives, including Senate Majority Leader Chuck Schumer, D-N.Y., have urged Biden to cancel $50,000 in outstanding federal debt per borrower via executive order. Democratic lawmakers have maintained that Biden could use existing executive authority under the Higher Education Act to order the Department of Education to “modify, compromise, waive or release” student loans.

The president has not said how much he is considering canceling, but signaled that $50,000 in debt forgiveness is not under consideration.

How much will the plan cost? 

Erasing $10,000 per borrower would require the government to cancel about $321 billion in federally backed loans, according to an analysis published by the Federal Reserve Bank of New York last week. That would benefit about 11.8 million borrowers, or roughly 31.1%, and cancel 30.5% of loans delinquent or in default prior to pandemic forbearance. 

Under the policy, the average borrower would receive $8,478 in student loan forgiveness. 

Should the Biden administration put in some constraints around forgiveness, like a household income limit of $75,000, the cost of the program would fall from $321 billion to $182 billion, according to the New York Fed. As of December 2021, the total outstanding balance for federally owned loans was $1.38 trillion.

Who will qualify for student loan forgiveness? 

The Biden administration is considering income caps for eligibility for student loan relief that would exclude higher-income earners. Officials have floated the possibility of limiting the relief to people who earned less than $125,000.

“The president talked, back on the campaign, about taking steps or looking at steps to help people making less than $125,000 a year, so that is the frame through which he’s making considerations at this point,”  White House press secretary Jen Psaki told reporters this week aboard board Air Force One.

If the Student Loan Forgiveness Plan goes through, When will it go into effect?

According to Turner, the timing is unclear, even as pressure for action is monumentally increasing. “I was speaking with a few sources just the other day who said they feel like this is still a few weeks in the making, because it’s still complicated,” Turner told PBS. “And they need to make sure they get this right. Not only legally but also, logistically, you know, I don’t need to remind borrowers that they’ve been in a payment and interest moratorium for more than two years. And so doing anything of this scale at this point, is going to take some time.”

But why is pressure increasing now? For starters, paused loans granted by the CARES Act will be ending on August 31. The CARES Act, which was signed into law in March 2020, includes emergency COVID relief benefits for college students, including paused student loan payments. The act has been extended numerous times due to pressure from student loan borrowers and financial aid advocates — in fact, it was originally supposed to end on May 1 before being extended to the August date.

Braxton Brewington, spokesperson for the Debt Collective, spoke to Forbes on the decision to unpause student loan payments. “Resuming costly student debt payments after a two year pause will likely go down as the worst political decision ever made by the Biden administration,” Brewington said. “At a time when costs for families are at a record high, the time to cancel student debt, narrow the racial wealth gap and boost our economy has never been more pressing.”

President Biden is also facing more heat now with the midterm elections fast-approaching, as many grassroots organizations and advocates are pushing him to fulfill some of his original campaign promises he made back in 2020. 

Will the executive order face a legal challenge?

Such sweeping executive action would almost certainly face a legal challenge, and it’s unclear whether it could survive in the current 6-3 conservative Supreme Court. 

Former President Barack Obama’s top Education Department lawyer, Charlie Rose, has suggested that canceling some debt for certain borrowers without tying relief to their individual needs would put the Biden team at risk of having its plan overruled in court, according to The Wall Street Journal. 

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