Biden announces relief for indebted college graduates

First modification: 08/25/2022 – 11:35

With Xavier Vila, RFI correspondent in Washington

“Keeping my campaign promise, my administration is announcing a plan to give working and middle-class families a break as they prepare to resume federal student loan payments in January 2023,” the president announced on Wednesday. Joe Biden on Twitter.

Biden’s plan that forgives part of the 1.6 trillion dollars of debt contracted by 45 million students with the federal government to pay for their university studies will face legal challenges that add uncertainty to the application of the measure.

University centers and solvent students denounce a plan that -if applied- would cancel 10,000 dollars of debt to those who earn less than 125,000 dollars a year. A discount that would double for recipients of Pell grants, which are awarded to students with incomes below $30,000 a year. Biden argued that the US economy would benefit from the measure.

This means that people will finally be able to leave behind a mountain of debt. And catch up on your rent and house bills, to finally think about buying a house, starting a family or starting a business.

The expense is necessary not only for reasons of social justice, but also so that “the United States wins the economic competition of the 21st century” thanks to education, justified the 79-year-old president during a subsequent speech.

Democratic senators Chuck Schumer and Elizabeth Warren evoked in a statement “a gigantic step taken toward resolving the student debt crisis.”

“Put about 500,000 million dollars of gasoline on the fire of inflation”

The opposition, on the other hand, denounces that the measure would aggravate the high inflation suffered by the country and would cost 300,000 million dollars. A calculation that is difficult to compare since a large part of the debt corresponds to the more than 8 million debtors who have already defaulted on their monthly payments, one in 5 affected students.

For the Republican leader in the Senate, Mitch McConnell, it was a “profoundly unfair” reform and “a slap in the face for all families who made sacrifices to save for college” and managed to fully repay the debt.

The decision also divides experts, among those who consider the financial gesture risky at a time when the United States faces rising prices.

Like Jason Furman, former economic adviser to former President Barack Obama, who warned on Twitter that it is “unconscious to throw some 500 billion dollars of gasoline on the fire of inflation.”

While the chief economist of the Moody’s agency, Mark Zandi, estimated for his part that its impact on growth or inflation would be “marginal”.

The burden of educational debt

The problem of educational debt is a decades-long problem in the United States. Colleges can often cost $10,000 to $70,000 a year, leaving graduates with overwhelming debt when they enter the workforce.

According to government estimates, the average US college student in debt when they graduate is $25,000, a sum that many take years or even decades to pay off.

In all, some 45 million college students across the country owe about $1.6 trillion, according to the White House.