What is Biden’s plan to write off up to $ 10,000 in student debt?
Student debt reached $ 1.56 trillion in 2020. Just over half of student debt is held by people under the age of thirty-nine, and people between eighteen and twenty-nine owe nearly a quarter.
A 2018 study found that most millennials have the same amount of debt as Gen Xers and Baby Boomers, approximately $ 37,000. What worries economists is that the debt owed by older generations is on the assets they own, their homes. As the younger generations pay historic debt levels for something which may not show the same return.
Student debt has made some millennials less likely to take on additional debt, like a mortgage that could have lasting economic implications. This has led some lawmakers and activists to call for forgiveness or cancellation of debt. Tuesday April 27, Senator Elizabeth Warren held a hearing and called on President Biden to cancel student debt.
In her remarks, the senator called student debt a “time bomb” and warned that “when it explodes, [it] could throw millions of families off a financial cliff. Warren went on to say that the fact that many borrowers pay around $ 400 in payments each month is a drag on the economy.
The senator also spoke about the racial disparities surrounding the student debt crisis and highlighted the disproportionate impact of student loans on black borrowers. The United States Civil Liberties Union compared the percentage of debt owed nearly two decades after borrowers acquired their student loan debt and found that while white borrowers owed only around 6%, black borrowers owed still around 95%.
What has Biden done so far regarding student debt?
One of the first steps Biden took when he took office was to extend the suspension of principal and interest payments on student debt until October 1, 2021.
Student debt forgiveness is widely popular, with a recent survey showing that around 58% of the public is in favor. President Biden has said he supports debt cancellation and plans to write off up to $ 10,000 in student debt per borrower through leadership action.
Some political analysts were surprised that Biden did not mention student debt when he was first speech to Congress this week. The speech focused primarily on two major legislative proposals that the administration sent to Congress, the US Plan for Jobs and the US Plan for Families. While the American Families Plan does not call for debt cancellation, it would offer two years of free community college to students in the United States.
It’s not about canceling student debt OR college for everyone.
– Representative Pramila Jayapal (@RepJayapal) April 25, 2021
While no date has been posted on a possible debt cancellation announcement, the conversation is very active. Higher education expert Mark Kantrowitz told CNBC that the cancellation of student debt worth $ 10,000 could bring the total debt owed down to $ 1.3 trillion, and nearly 15 million people would “have their balances reset.” Mr Kantrowitz also said news on whether the administration will pursue executive action overturn should be known by June or July of this year.