On Wednesday, as President Joe Biden was ready to fulfill his pledge to provide up to $10,000 in debt cancellation, millions of Americans awaited word on the fate of their federal student loans.
According to three sources with knowledge of the decision, debtors who make less than $125,000 annually would be eligible for the loan forgiveness. However, specifics of the proposal have been kept under wraps. Additionally, until January, Biden plans to prolong a moratorium on federal student loan payments.
In the lead-up to this fall’s midterm elections, if Biden’s proposal is successful in withstanding the legal challenges that are virtually likely to follow, it may provide a windfall to a large portion of the country. According to government figures, more than 43 million people owe a total of $1.6 trillion in federal student debt, with roughly a third owing less than $10,000.
However, it is unclear that the move will excite any of the groups that have been vying for power as Biden decides how much to cancel and for whom.
Liberals have put pressure on Biden to provide more comprehensive assistance to hard-hit debtors, while moderates and Republicans have questioned the fairness of any generalized forgiveness. The wait for Biden’s decision has just increased the expectation for what even his own advisers admit is a position where there is no way to win politically. The individuals discussed Biden’s anticipated statement on the condition of anonymity.
Just days before millions of Americans were expected to learn when their next student loan installments were due, the pandemic-era payment moratorium was extended. With the current halt scheduled to conclude on August 31, this is the closest the government has been to the conclusion of the payment freeze extension.
After Biden returns from his vacation in Rehoboth Beach, Delaware, the White House was scheduled to make the news on Wednesday. For a wider revelation, the government briefly contemplated higher education institutions in the president’s state, but they ultimately scaled down their intentions.
As he competed with more radical contenders for the Democratic candidacy in the 2020 presidential race, Biden was originally dubious about student loan debt elimination. Senators Elizabeth Warren of Massachusetts and Bernie Sanders of Vermont have advocated cancellations of at least $50,000.
Biden revealed his original plan for debt cancellation of $10,000 per borrower, with no mention of an income restriction, as he attempted to bolster support among younger voters and get ready for a general election fight against President Donald Trump.
In recent months, as surging inflation took a political toll and he sought to fend off political criticism that the cancellation would favor people with greater take-home pay, Biden limited his campaign commitment by supporting the income restriction. However, Democrats have urged the administration to be as inclusive as possible with debt relief, from congressional leaders to those who are up for challenging reelection this November. They do this in part because they see it as a motivating issue, especially for Black and young voters this year.
Even though Biden was still on his summer vacation on Tuesday, the frantic last-minute lobbying persisted. According to a Democrat with knowledge of the discussion, Senate Majority Leader Chuck Schumer, D-N.Y., who has been one of the most vocal supporters of canceling student loan debt in recent years, talked privately with Biden and begged the president to erase as much debt as the administration could.
According to the Democrat who requested anonymity to discuss a private chat, Schumer convinced Biden that doing so was the ethically and financially proper thing to do.
Three sources with knowledge of the discussions inside the administration said that since at least early summer, officials have spoken about waiving more than $10,000 in student loan debt for certain borrower groups, such as those receiving Pell Grants. That was still one of the last factors Biden was taking into account before the statement on Wednesday.
Democrats are hoping that by making the announcement, Biden, whose popularity has declined over the last year, would encourage younger people to cast ballots in November.
Biden “will receive a lot of credit for following through on something he was committed to,” said Celinda Lake, a Democratic pollster who worked with Biden during the 2020 race, despite the fact that his proposal is more limited than what he first suggested during the campaign.
She referred to student debt as a “gateway problem” for younger voters, which means it influences their opinions and choices about the cost of housing and careers. While student loans did not top the list of issues that most concerned people in that age group, a survey of 18 to 29-year-olds conducted by the Harvard Institute of Politics in March found that 59% of those surveyed supported debt cancellation of some sort, whether for all borrowers or those most in need.
Some supporters had already prepared themselves for disappointment.
Derrick Johnson, president of the NAACP, which has fiercely pushed Biden to take more decisive action, warned on Tuesday that “if the reports are accurate, we’ve got a problem.” He made a point of pointing out that Black pupils had more debut loads than White students.
In his words, “President Biden’s decision on student debt cannot be the most recent illustration of a program that has failed Black people, particularly Black women. This is not how you should treat Black people, who participated in record-breaking voting turnout in 2020 and contributed 90% of the vote.
The specifics of Biden’s announcement, according to John Della Volpe, the head of polling at the Harvard Kennedy School Institute of Politics, were less significant than the choice itself.
“Trust in politics, the government, and our system is at issue. It’s also about having faith in the person, in this instance, President Biden, said Della Volpe.
Student loan forgiveness “adds an extra tailwind to an already improved position with young people,” according to Della Volpe, when combined with worries about tightening abortion laws and Trump’s return to the national stage.
In contrast, Republicans see only political benefits if Biden pursues a significant cancellation of student debt prior to the November midterm elections, foreseeing negative consequences for Democrats, particularly in states with sizable populations of voters from the working class who lack college degrees. On the basis that Congress has never explicitly granted the president the right to cancel debt on his own, opponents of wide student debt forgiveness also worry that it may expose the White House to legal action.
The Republican National Committee denounced Biden’s anticipated speech on Tuesday, branding it a “handout to the affluent” that unjustly places the responsibility of paying for the wealthy’s higher education on lower-income taxpayers and those who have already repaid their student loans.
Rep. Kevin Brady, R-Texas, the chair of the House Ways and Means Committee and the top Republican, said in a tweet on Tuesday, “My neighbor, a detective, worked three jobs (including selling carpet) & his wife labored to make sure their daughter earned a fine college degree w/no student debt.” “Big giving up. Now that their taxes are been paid, who is left with student loan debt?
Federal loan servicers, who were told to withhold billing statements while Biden considered his options, are displeased with Biden’s protracted discussions.
According to Scott Buchanan, executive director of the Student Loan Servicing Alliance, industry organizations had complained that the delayed decision had given them just a few days to inform borrowers, retrain customer service representatives, and update websites and digital payment systems.
It raises the possibility that some borrowers would unintentionally learn they must make payments, he said.
At this point, he thought that was the danger we were taking. With 35 million borrowers who have various loan kinds and statuses, it is impossible to act quickly.
