Biden forgives some student debt, a benefit that extends to millions

First modification: 08/24/2022 – 19:45

Accessing higher education in the United States is for many synonymous with large bank loans and therefore long-term debt.

With that context, President Joe Biden announced relief from that headache for many college graduates and professional graduates. His government will launch a plan to cancel up to $10,000 of the credit requested by each student.

The measure would automatically benefit some eight million citizens, while others would have to apply for forgiveness, the Department of Education said.

“Delivering on one of my campaign promises, my Administration is announcing a plan to give working and middle-class families some breathing room,” the president said in a message posted on his Twitter account.

The provision has some conditions: it will only benefit those who earn less than $125,000 a year or who, while married, have an income of less than $250,000 each year. Current students would only be eligible for the benefit if their loans originated before July 1, 2022.

“Earning a college degree or certificate should give every person in America a head start in securing a bright future. But for many people, student loan debt has hindered their ability to pursue their dreams, including buying a home, start a business or provide for his family,” said Secretary of Education Miguel Cardona.

More than 43 million people have federal student debt, with an average balance of $37,667 and rising for more than 45 million borrowers, according to federal data, which the White House considers “a significant burden on America’s middle class.” Joined”.

A counterproductive measure?

For many it is a solidarity measure on the part of the Government, since the United States has rates of university tuition substantially higher than most developed countries. However, there are those who foresee a negative side effect.

Some economists say canceling the debt will free up hundreds of billions of dollars for new consumer spending that could be earmarked for home purchases, adding a new twist to the country’s fight against inflation.

Cutting $10 billion in federal debt for every student would equal $321 billion in federal student loans and wipe out the entire balance for 11.8 million borrowers, or 31% of them, a study by the New York Federal Reserve shows.

Republicans say the decision will disproportionately help people with higher incomes.

If the plan survives the legal challenges that are sure to come, the government could offer unexpected relief to a swath of the nation just ahead of the midterm elections next November, in which Republicans and Democrats face off to win the majority in Congress.

Several Democratic Party bishops had pushed for Biden to forgive up to $50,000 per borrower, but applauded the decision.

With Reuters and AP