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Biden is canceling up to $10K in student loans, $20K for Pell Grant recipients

More than two years ago, then-presidential candidate Joe Biden pledged to cancel at least $10,000 in federal student loans. The pledge has followed his administration ever since.
Brendan Smialowski
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AFP via Getty Images
More than two years ago, then-presidential candidate Joe Biden pledged to cancel at least $10,000 in federal student loans. The pledge has followed his administration ever since.

Updated August 24, 2022 at 1:39 PM ET

On Wednesday, President Biden announced a sweeping effort to forgive up to $20,000 of federal student loan debt for Pell Grant recipients, and up to $10,000 for other qualifying borrowers. Biden also extended the federal student loan payment pause through Dec. 31.

"In keeping with my campaign promise, my Administration is announcing a plan to give working and middle class families breathing room as they prepare to resume federal student loan payments in January 2023," Biden said in a tweet on Wednesday.

U.S. Secretary of Education Miguel Cardona said in a statement, "Today, we're delivering targeted relief that will help ensure borrowers are not placed in a worse position financially because of the pandemic, and restore trust in a system that should be creating opportunity, not a debt trap."

To qualify for the $10,000 forgiveness, individual borrowers must earn less than $125,000 a year, or less than $250,000 a year for couples. To qualify for the $20,000 forgiveness, borrowers must meet those income requirements and must have received a Pell Grant in college. Pell Grants are designed to help low-income students pay for higher education.

The Department of Education estimates that, among borrowers who are no longer in school, nearly 90% of relief dollars will go to those earning less than $75,000 a year.

About 43 million borrowers will benefit, and 20 million will have their debt completely canceled, according to a senior administration official. The White House said more than 60% of current federal student loan borrowers also received Pell Grants.

According to the White House, Parent PLUS loans will also qualify for cancellation under the new policy.

In order to benefit, though, most borrowers will have to submit an application to verify their income. The Education Department said nearly 8 million borrowers already have income information on file, and should qualify to have their debts canceled automatically. The department will announce further details on how borrowers can claim this relief in the weeks ahead.

Some borrowers are celebrating, others hoped for more

Many borrowers are celebrating Biden's announcement: Giselle Parks of Orlando, Fla., expects to have her $5,000 in student loan debt completely erased.

"Holy cow," she said. "Holy cow... I need to tell my family immediately!"

Trianna Downing in D.C. said she was in shock. "I can't even process it yet... At first I was, like, dancing, and then I was like, wait, should I log into my account and see if it actually happened?"

Downing expects her debts to drop from $16,000 to $6,000.

"This is going to change and save lives," tweeted Rep. Ayanna Pressley of Massachusetts, who has long advocated for student loan forgiveness.

Sen. Elizabeth Warren, also of Massachusetts, highlighted the ways Biden's plan could help address racial inequalities: "Because Black Americans borrow more money to go to school, borrow more money in school and have a harder time paying their debt off after school, the President's action will also help narrow the racial wealth gap in the United States among borrowers."

According to a 2016 Brookings analysis, "The moment they earn their bachelor's degrees, black college graduates owe $7,400 more on average than their white peers... Differences in interest accrual and graduate school borrowing lead to black graduates holding nearly $53,000 in student loan debt four years after graduation — almost twice as much as their white counterparts."

Some higher-debt borrowers were left disappointed by Wednesday's announcement, especially after a group of House and Senate Democrats, including Pressley and Warren, had called on Biden to cancel $50,000 in federal student debt.

"It's hard to be excited about it," says Briana Ford of Columbia, S.C. She's a Black borrower who owes almost $60,000 in student loans.

"I wouldn't give it back, but it's hard to be excited about it."

Republicans aren't too excited either. They've long argued against broad-based loan forgiveness.

"This is a slap in the face to those who never went to college, as well as borrowers who upheld their responsibility to taxpayers and paid back their loans," said Rep. Virginia Foxx of North Carolina, the top Republican on the House Education Committee, in a Tuesday night statement.

Many economists and higher education experts also opposed the move, arguing that widespread debt cancellation would do nothing to fix the rising costs of college.

In a May analysis, the Committee for a Responsible Federal Budget estimated a policy like the one Biden announced would cost at least $230 billion, and warned that even income limits "would do almost nothing to alleviate the central issues with the policy, namely that it is regressive, inflationary, expensive, and would likely do more to increase the cost of higher education going forward than to reduce it."

Can a President even do this without the support of Congress?

This question has been at the heart of the debt cancellation debate for several years now. After all, any move that essentially requires the government to spend money (or lose it) generally has to go through Congress. Right?

Perhaps anticipating legal pushback, the Biden administration published its legal reasoning in a memorandum at the same time it announced the debt cancellation package.

The memo says The HEROES Act, first enacted after the September 11 attacks, gives the Education Secretary the power to grant relief from student loan requirements during specific periods, think: wartime or a national emergency.

As such, the memo argues, "in present circumstances, this authority could be used to effectuate a program of categorical debt cancellation directed at addressing the financial harms caused by the COVID-19 pandemic."

The administration made a similar argument in justifying its renovation of the troubled Public Service Loan Forgiveness program.

That said, it's possible, perhaps likely, the move will be challenged in court.

Will it make inflation worse?

Experts have expressed concern that broad-based student loan forgiveness would exacerbate inflation, which is already one of Biden's greatest political weaknesses heading into this fall's midterm elections.

"Student loan debt relief is spending that raises demand and increases inflation," tweeted former U.S. Treasury Secretary Lawrence Summers earlier this week.

"It consumes resources that could be better used helping those who did not, for whatever reason, have the chance to attend college. It will also tend to be inflationary by raising tuitions."

Summers' opposition stirred considerable dissent.

"You have to tell a pretty bizarre story about expectations in order for loan forgiveness to boost inflation," responded Susan Dynarski, an economist and professor at the Harvard Graduate School of Education.

"No one has been making student loan payments for two years. Forgiveness will *not* increase cash flow to borrowers right now. That increase in available cash happened *2 years ago* when payments were suspended."

Borrowers have been waiting years for loan forgiveness

The loan forgiveness announcement comes more than two years after then-presidential candidate Joe Biden pledged to cancel at least $10,000 in federal student loans. The pledge has followed the administration since. Wednesday's move comes after several extensions to the student loan moratorium, and attempts by some Democrats to expand forgiveness from the original plan to $50,000.

In June, an NPR/Ipsos poll found a majority of the general public (55%) supported forgiving up to $10,000 of a person's federal student loan debt. But the more generous the relief, the more that support narrowed. Forty-seven percent of all respondents said they supported forgiving up to $50,000 in debt, while 41% expressed support for wiping the slate completely clean for all borrowers.

Support for debt relief was, not surprisingly, higher among borrowers themselves. But when asked to choose between debt forgiveness and addressing the high cost of college, an overwhelming majority — borrowers and non-borrowers alike — said addressing the rising cost of college was most important.

Copyright 2022 NPR. To see more, visit https://www.npr.org.

Cory Turner reports and edits for the NPR Ed team. He's helped lead several of the team's signature reporting projects, including "The Truth About America's Graduation Rate" (2015), the groundbreaking "School Money" series (2016), "Raising Kings: A Year Of Love And Struggle At Ron Brown College Prep" (2017), and the NPR Life Kit parenting podcast with Sesame Workshop (2019). His year-long investigation with NPR's Chris Arnold, "The Trouble With TEACH Grants" (2018), led the U.S. Department of Education to change the rules of a troubled federal grant program that had unfairly hurt thousands of teachers.
Sequoia Carrillo is an assistant editor for NPR's Education Team. Along with writing, producing, and reporting for the team, she manages the Student Podcast Challenge.