United States President Joe Biden announced today (Wednesday) that he will fulfill his election campaign promise and “forgive” $10,000 in federal student debt. The students eligible for debt cancellation are those who earn less than $125,000 a year. Students with debt who are eligible for scholarships will also be entitled to debt cancellation of $20,000.
The White House’s unprecedented step – writing off hundreds of billions of dollars in debt – comes after years of public pressure on the issue that has intensified in recent months, with heated debates among administration officials. The discussions centered on the question of how canceling student loans might affect the high inflation that affects all Americans, the amount of student debt that should be canceled and whether the president even has the authority to reduce people’s debts without the legislative authority.
The upcoming mid-term elections, which will be held in November, added pressure on the administration to reach a decision. Those who supported the measure said that student debt forgiveness would encourage younger voters, with whom Biden has lost popularity, to turn out to vote.
$1.7 trillion in education debt
The “student loan crisis” has become a familiar term in the mouths of politicians and households across the US. When the Corona epidemic hit the US in March 2020 and damaged the economy, the Trump administration suspended student loan payments. That delay has since been extended six times, and Biden’s White House chief of staff, Ron Klein, said earlier this year that the president would make his decision on student loan forgiveness before payments resume in September.
More than 40 million Americans are in debt for their education, debts that add up to $1.7 trillion, which far exceeds credit card debt or car purchases in the US. Today, the average debt for an American student is over $30,000, compared to $12,000 in 1980.
As published in “CNBC”, only about half of the borrowers were in the debt repayment process in 2019. A quarter of them – that is, more than 10 million people – ended up in debt default or criminal proceedings, and the rest filed for temporary relief for struggling borrowers, including requests for deferrals. Many have compared these dismal figures to the mortgage crisis of 2008. “The student loan system is broken,” said Percys Yu, policy director for the Student Borrower Advocacy Center.