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On May 22, 2024, President Biden announced that he is cancelling $7.7 billion in student loan debt for an additional 160,000 people, bringing the Biden administration's total cancelled student loan debt to about $167 billion for 4.75 million borrowers.
The $7.7 billion announced in late May will be distributed among borrowers in three categories:
$5.2 billion for approximately 67,000 borrowers eligible for debt cancellation through the Public Service Loan Forgiveness Plan (PSLF)
$613 million for approximately 54,000 borrowers enrolled in Biden's Saving on a Valuable Education (SAVE) Plan who are eligible for the shortened time-to-forgiveness benefit
$1.9 billion for approximately 39,200 people who are receiving forgiveness through the income-driven repayment (IDR) plan
This latest round of forgiveness means that one in 10 federal student loan borrowers have now been approved for debt relief. The loan forgiveness will lift crippling financial burdens from millions of people, allowing them the opportunity to flourish.
In April of 2024, the Biden administration introduced a fresh student loan forgiveness initiative aimed at reducing the debt burden on tens of millions of Americans through various expansions to loan waivers. This proposal is the Biden Administration's next step in providing debt relief as quickly as possible to as many people as possible.
Public comments on the proposal are closed, and the Department of Education is now reviewing those comments. The Biden administration hopes to publish a final rule that delivers relief this fall. Here’s an overview of the proposal and its potential impact on families across the nation:
Focused Forgiveness Efforts
This proposal distinguishes itself by focusing on specific groups, including:
Those already eligible for debt cancellation who haven't yet applied.
Borrowers who have been repaying their student loans for over 20 years, or 25 years for those with graduate loans.
Individuals who attended non-accredited institutions.
Borrowers experiencing significant financial hardship.
This targeted approach not only makes the proposal more likely to withstand legal scrutiny but also ensures that relief reaches those who need it most.
Benefits for Young Families
A key component of the proposal is to consider high childcare costs as a marker of financial hardship. This provision is poised to benefit millions of families, enabling them to allocate more resources towards raising their children. This reduction in financial burden is expected to decrease child poverty rates, which in turn could enhance school performance and overall quality of life for children.
Addressing child poverty is not only the right thing to do, but also an important economic strategy. The economic drain from higher healthcare and correctional services costs due to child poverty is substantial, costing the U.S. government around $1 trillion annually. Investing in reducing child poverty is predicted to yield substantial economic returns, saving $7 for every dollar spent.
Economic Advantages
As of 2023, consumer debt in the U.S. totals approximately $4.8 trillion. High levels of consumer debt dampen spending, a significant factor in the onset of the Great Recession. By eliminating hundreds of billions in consumer debt, Biden's plan would likely boost consumer spending and energize our economy.
Additionally, the proposal focuses on forgiving up to $20,000 in unpaid interest, rather than the initial loan itself. This strategy helps ease the financial strain on borrowers while ensuring that lenders recover their costs. This balanced approach benefits both consumers and loan companies and could save taxpayers billions in future economic costs.
Overall, the policy aims to stimulate spending, ensure fairness to loan companies, and provide significant economic and social benefits to American families.