Biden’s Student Loan Plan Still Leaves Millions With Debt
PBiden, a resident of the United States, previewed Wednesday’s backlash about his proposal to forgo federal student loan debt up to $20,000 each. “Some think it’s too much,” he said in remarks at the White House. “Some think it’s too little. However, my plan I believe is just and reasonable. It focuses the benefit on middle-class and working families.”
For those who earn less than $125,000 per annum, the plan forgives $10,000 of federal student loans. It also allows for $20,000 to be forgiven for students who received Pell Grants to assist low-income students and who meet similar income requirements.
The long-awaited decision of his late father will help to reduce debt and provide relief for around 43 million Americans. According to White House estimates it will also erase student debt that amounts to approximately 20 million.
Nearly eight millions borrowers could be eligible to have debt forgiveness applied directly to their accounts if they meet the criteria. An application will soon be available for the remaining borrowers.
A total of $1.6 trillion is owed by federal student loans to 45 million Americans. By White House estimates, Biden’s plan will leave about two million federal borrowers with no student debt relief, and about 25 million will still be left with some student debt. This program won’t affect any private loans.
Critique of the plan
Both ends of politics were quick to criticize his plan.
Derrick Johnson of the NAACP stated that this policy would not benefit enough Black borrowers. “President Biden’s decision on student debt cannot become the latest example of a policy that has left Black people—especially Black women—behind,” he said in a statement. “This is not how you treat Black voters who turned out in record numbers and provided 90% of their vote to once again save democracy in 2020.”
While white borrowers collectively owe just over half of the country’s student debt balance, Black borrowers owe more on average. Black women have the highest student debt load, with an average of $41,466 in one-year after they graduate from college. That compares to $33,851 for white women and $27,606 to Asian women.
This burden is made worse by the gender wage and racial wealth gaps that Black women face at work. A Brookings 2016 study found that Black graduates owe $25,000 more on average than their white counterparts four years after graduating.
“We tend to look at who is struggling the most with student debt, and that is Black borrowers. They are more likely to borrow and borrow more and struggle more with repayment,” says Victoria Jackson, assistant director of higher education policy for the Education Trust, a nonprofit that advocates for educational equity.
“When we look at that gap, $10,000 or $20,000 just isn’t even enough to cover what people are borrowing to complete a bachelor’s degree,” Jackson says.
She worries about the fact that means-testing policies of exclusion of those earning more than $125,000 do not take into account the realities of the wealth gap. “For Black folks, even if they’re making over $125,000, that often is not an accurate reflection of the resources they have available to them to repay their student loans,” she says.
Education Trust is among those advocating debt cancellation for $50,000 per borrower.
Massachusetts Senator Elizabeth Warren and Vermont Sen. Bernie Sanders were among the Democrats who advocated for $50,000 in universal loan forgiveness. They said it would help close the racial wealth gaps and assist Black borrowers that have been heavily burdened with student loans. But Biden had indicated months ago that his plan wouldn’t go that far.
“We have got to do more,” Sanders said in a statement on Wednesday. “At a time of massive income and wealth inequality—education, from pre-school through graduate school, must be a fundamental right for all—not a privilege for the wealthy few.”
Charlie Eaton, an assistant professor of sociology at the University of California, Merced, says the policy will be “transformative.” But he recently published an analysis showing that eliminating $50,000 in debt for those who make less than $150,000 (a higher ceiling than Biden’s policy) would wipe out the entire debt burden for 76% of borrowers, compared to wiping out the burden for 32% of borrowers when eliminating $10,000 in debt.
While many liberals are calling for greater debt cancellation, conservatives quickly criticized the Biden administration for not taking any action. Senate Republican Leader Mitch McConnell called the policy a “slap in the face to every family who sacrificed to save for college, every graduate who paid their debt, and every American who chose a certain career path or volunteered to serve in our Armed Forces in order to avoid taking on debt.”
“This policy is astonishingly unfair,” he said.
“Today, [Biden] forced every American who didn’t attend college or has already paid off their loans to now pay off others’ debts,” Florida Sen. Rick Scott said in a tweet.
What’s in the plan
Under the Biden Administration’s plan, about 27 million people will be eligible to receive up to $20,000 in debt relief because they received Pell Grants to attend college, according to an estimate by the U.S. Education Department. Pell Grant recipients make up about 60% of all student loan holders. Black students are twice as likely to get a Pell Grant as are white students.
White House estimates that 90 percent of debt relief will go to people earning less than $75,000 annually.
Biden also extended the pandemic-related pause on federal student loan payments “one final time” through Dec. 31. And he lowered the monthly payments borrowers will have to make on their loans, from 10% to 5% of their discretionary income, while also removing added interest, ensuring that borrowers’ loan balance won’t grow as long as they’re making monthly payments.
According to Penn Wharton Budget Model, the plan could cost more than $300 billion in 10 years. However, others point out that students are unlikely to pay off some of their student loans.
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