After months of intense debate, President Joe Biden has announced his plans for forgiving student debt for borrowers, which includes forgiving $10,000 for borrowers who make less than $125,000 per year and extending the payment freeze until the end of the year.
In a tweet, Biden stated that the amount of forgiveness will be higher for low-income borrowers who had Pell Grants while in college. They will receive $20,000 in student loan forgiveness.
Biden has been under the microscope of public scrutiny and criticism for his long-waited decision of wider student debt relief for more than 43 million Americans just days before the Aug 31 deadline to announce the extension of the loan payment moratorium.
The president made good on his campaign promises to address student debt, but fell short of the $50,000 debt relief that several of his fellow Democrats were pushing for.
“If student debt repayments can be paused over and over again, there’s no reason why the President cannot cancel a minimum of $50,000,” said NAACP President Derrick Johnson in a tweet.
So far, his administration has canceled nearly $32 billion in outstanding federal student debt by expanding existing forgiveness programs for disabled borrowers, public sector workers, and students who were defrauded by for-profit colleges.
NAACP Image Award nominated author, publicist, and entrepreneur Gwen Richardson said this plan does nothing for future college-bound students and mocks the efforts her daughter has made to pay off $43,000 in two years.
“It may increase borrowing levels as these [incoming] students will assume they’ll have part of their debt wiped out.”
Ronenia Jenkins, a senior benefits administrator, said she is grateful for the reduction even though she prefers more.
“I have $147,000 in debt from three degrees which provided me with a better quality of life,” she said. “I have no problem repaying debt back, but their student loan system is and have been rigged for some time when trying to eliminate higher debt.”
The U.S federal debt is now at $1.6 trillion and have increase significantly throughout the years. Advocates for complete student debt cancelation argue that it would help close the racial wealth gap because Black student tend to borrow larger amounts of debt and take a longer time to pay them off compared to their white peers.
According to a new CNBC poll, 59 percent of Americans believe canceling student loan debt will make inflation worse. Some borrowers say they would not change their spending habits if their college debt – or a portion of it- is canceled.
The Department of Education says it is working on new regulations to permanently improve forgiveness programs that are already in place. They also announced plans to protect low-income borrower’s by capping monthly payments for undergraduate loans at 5 percent of a borrower’s discretionary income.
Plan draws mixed reaction from Black leaders
By ReShonda Tate
According to the Brookings Institute, Black households carry more student debt regardless of their incomes after graduation. Approximately one in four Black Americans have negative net worth — meaning their total debt exceeds their total assets. In a recent study, the Brookings Institute found that Black borrowers hold on average nearly $53,000 in student loan debt four years after they’ve graduated. That’s close to double the loan burden of their white peers; similarly, the NAACP has found that, 20 years after arriving at college, the median Black borrower owes 95% of their debt — compared to 6% for the median white borrower.
That’s why several Black leaders are unhappy with the plan:
“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. The goal should be to see the most amount of relief for the highest number of borrowers. President Biden has indicated that he is not considering a $50,000 debt reduction. But canceling just $10,000 in debt would be bad public policy and a devastating political mistake.”
–Derrick Johnson, NAACP President
“President Biden’s ‘Student Debt Relief Plan’ is a step in the right direction. It’s no secret that excessive student loan debt disproportionately impacts the ability for Black families to build generational wealth. Nearly two-thirds of the $1.7 trillion student debt in America is held by women, and Black women borrowers are more negatively affected due to systemic racism and economic insecurity. America can and must do better. Clearly more must be done to address the deficiencies in the way higher education is financed in this nation. The 2022 Mid-Term Election will determine if student loan debt relief will be expanded in 2023 and beyond. So, now is the time for voters, especially young voters, to challenge those seeking federal office to commit to expanding student loan debt as a good investment in our nation’s economic future.”
– Melanie L. Campbell, President & CEO of the National Coalition on Black Civic Participation and Convener of the Black Women’s Roundtable (BWR)
“While this is undoubtably a historic day, there is still more work to do. The $125,000 income cap will leave a large amount of the population behind, especially in an era of high inflation. A Black doctor or attorney who earns above the cap could very well have six-figure student debt. Low levels of cancellation might leave already distressed Black borrowers struggling with repayment. Those who may qualify for loan forgiveness after several years of working in the public service field through the Public Service Loan Forgiveness program still face long delays when applying.”
-Ebonie Riley, NAN Senior Vice President of Policy & Strategic Partnerships
“Student debt is a trap and 45 million Americans were scammed into predatory loans. Cancel all debt to free the 45 million Americans from the scam, then let’s fix the cost of tuition.”
-Nina Turner, Senior fellow, Institute on Race, Power and Political Economy