Watch Live: Biden announces plan to cancel student debt up to $20,000

Watch Live: Biden announces plan to cancel student debt up to $20,000

Washington — President Biden said Wednesday he is forgiving up to $10,000 in federal student loan debt for millions of Americans and an additional $10,000 for low-income borrowers while extending a pause on monthly payments, delivering long-awaited relief just weeks before the midterm elections.

Under the plan, which the president unveiled on Twitter, borrowers earning less than $125,000 a year, or couples earning less than $250,000 a year, will be eligible for up to $10,000 in loan forgiveness. Recipients of Pell Grants, which are given to students with the greatest financial need, are eligible for another $10,000 in relief.

“An entire generation is now saddled with unsustainable debt in exchange for an attempt at least at a college degree,” Mr. Biden said, explaining his decision in remarks at the White House Wednesday. “The burden is so heavy that even if you graduate, you may not have access to the middle-class life that the college degree once provided.”

Current students will be eligible for debt relief as well, although future students will not be, according to senior administration officials who explained the details of the plan on a call with reporters. Some loan payments will also be capped at 5% of monthly income.

Mr. Biden said the plan will be paid for by deficit reduction under his administration.

“There is plenty of deficit reduction to pay for the programs … many times over,” the president said Wednesday. “I will never apologize for helping Americans, working Americans, and the middle class.”

The president is also deferring student loan repayments until the end of the year, and the Education Department and the president said this will be the last time the pandemic-era pause is extended.

The Education Department said nearly 8 million borrowers will have their debt forgiven automatically, while others will have to apply for relief. The Department of Education will provide a short application for borrowers seeking debt relief in the coming weeks, Mr. Biden said. The Department of Education says borrowers can sign up to be notified when the application is available.

Income caps will be based on either 2020 or 2021 income. If a person or couple’s income was below the cap in either year, they will be eligible, a senior administration official said.

    Here’s who is eligible for Biden’s student loan forgiveness program

Tens of millions of borrowers are expected to qualify relief under the plan. While more than 43 million borrowers carry federal student loan debt, according to Education Department data, the Federal Reserve says the majority have less than $25,000 in debt and a quarter owe less than $10,000.

The move to forgive student debt follows months of internal White House deliberations over the feasibility and cost of doing so. Mr. Biden made student loan forgiveness one of his top priorities during his presidential campaign, and Democrats have pushed the administration to deliver on his promise. Republicans have said Mr. Biden does not have the authority to cancel the debt, and his plan is certain to face a barrage of legal challenges.

In anticipation of the court battles to come, the Education Department released a memo from general counsel Lisa Brown with legal justification for Mr. Biden’s actions. Brown cited a 2003 law known as the HEROES Act, which she said gives the education secretary broad authority over student aid programs during a period of national emergency.

“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,” Brown wrote. “The Secretary could waive or modify statutory and regulatory provisions to effectuate a certain amount of cancellation for borrowers who have been financially harmed because of the COVID19 pandemic.”

A Penn Wharton Budget Model analysis concluded that forgiving $10,000 of student loan debt for those earning up to $125,000 a year would cost nearly $300 billion in the first year. It also found more than two-thirds of the debt forgiveness would aid Americans in the top 60% of earners.

Low-income Americans who never attended college and are struggling financially amid record-high inflation would not benefit from any debt cancellation, critics of student debt cancellation point out. Erasing some student loan debt would also not address the rising cost of college, which has historically outpaced inflation in recent decades.

Senior administration officials on the call with reporters argued that any impact on inflation by nixing student debt would be “largely offset” by the resuming of student loan payments.

The pause on student loan repayment began under the Trump administration at the onset of the pandemic, and Mr. Biden has paused student loan repayments a total of four times since he took office. With interest rates set to zero, the pause has saved federal student loan borrowers more than $1.5 billion each month, according to an April report from the Financial Health Network.

Steven Portnoy and Kristin Brown contributed to this report.

Kathryn Watson

Kathryn Watson is a politics reporter for CBS News Digital based in Washington, D.C.