Biden to cancel student loans for millions of US borrowers
/ Our Today
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WASHINGTON (Reuters)
United States President Joe Biden will announce today (August 24) that the government will forgive US$10,000 in student loans for many of the country’s debt-saddled college-goers, sources say, a move that could boost support for Democrats in midterm elections, but may increase inflation as well.
Canceling the debt will free up hundreds of billions of dollars for new consumer spending, adding a new wrinkle to the country’s inflation fight, economists say.
Democrats have pushed for Biden to forgive as much as US$50,000 per borrower, arguing that the debt makes it impossible for younger Americans to save for home down payments or other big consumer purchases. Republicans argue the move will disproportionately help people earning higher incomes.
US consumers carry a massive US$1.75 trillion in student loan debt, most of it held by the federal government, the result of private and state-backed university tuition fees that are substantially higher than in most other rich countries.
The administration will extend its pause on student loan repayment through to the end of the year, while also announcing plans to forgive as much as US$10,000 in student debt for borrowers whose income falls below US$125,000 a year.
It will also cancel up to US$20,000 in debt for Pell Grant recipients, some six million students from low-income families.
Cutting US$10,000 in federal debt for every student would amount to US$321 billion of federal student loans and eliminate the entire balance for 11.8 million borrowers, or 31 per cent of them, a New York Federal Reserve study shows.
A pandemic-linked government pause in student loan interest and payments is due to expire at the end of August. Borrower balances have been frozen since the beginning of the COVID-19 outbreak, with no payments required on most federal student loans since March 2020.
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