WASHINGTON: On Wednesday, millions of Americans were waiting to hear what would happen to their federal student loans. President Joe Biden was getting ready to make good on his campaign promise to cancel up to $10,000 of student loans.
Details of the plan have been kept secret, but three people who know about it say that borrowers who make less than $125,000 a year would be able to get their loans forgiven. Biden is also going to put off making payments on federal student loans until January.
If it stands up to the legal challenges that are almost certain to come, Biden’s plan could help a lot of people before the midterm elections this fall. Federal data shows that more than 43 million people owe a total of $1.6 trillion in federal student loans. Of those, almost a third owe less than $10,000.
Still, the move isn’t likely to please any of the groups that have been trying to get Biden’s attention as he decides how much to cancel and for whom.
Liberals have put pressure on Biden to help more hard-hit borrowers, and moderates and Republicans have questioned the fairness of forgiving a lot of debt. The longer Biden takes to make a decision, the more people are waiting for what his own staffers say is a political no-win situation. People who didn’t want to be named talking about what Biden was going to say ahead of time.
The continuation of the payment freeze during the pandemic comes just days before millions of Americans were going to find out when their next student loan bills are due. This is the closest the government has ever been to the end of the payment freeze extension. The current freeze is set to end on August 31.
The White House was going to make the announcement on Wednesday after Biden got back from his vacation in Rehoboth Beach, Delaware. The administration briefly thought about a bigger reveal at a college or university in the president’s home state but changed their minds.
As he ran for the Democratic nomination for president in 2020, Biden was at first skeptical about getting rid of student loan debt. This was because he was running against more progressive candidates. Sens. Elizabeth Warren (D-Massachusetts) and Bernie Sanders (I-Vermont) wanted to cancel loans of at least $50,000.
As he tried to win over younger voters and get ready for the general election against President Donald Trump, Biden announced his plan to cancel $10,000 of each borrower’s debt. There was no mention of an income cap in this plan.
In recent months, Biden has changed his campaign promise by agreeing to the income limit. This is because rising inflation has hurt his political standing, and he wanted to stop political attacks that the cancellation would help people with higher take-home pay. But Democrats, from those in charge of Congress to those who have tough reelection campaigns this November, have pushed the administration to go as far as possible on debt relief. They see it as a way to bring people together, especially young and Black voters this November.
Even though Biden was still on vacation, the last-minute lobbying continued on Tuesday. Senate Majority Leader Chuck Schumer, D-N.Y., has been one of the loudest advocates in recent years for getting rid of student loan debt. According to a Democrat who was on the call, Schumer pleaded with the president to get rid of as much debt as possible.
Schumer told Biden that doing so would be morally and economically right, said the Democrat, who asked not to be named because he was talking about a private conversation.
Officials in the administration have talked about forgiving more than $10,000 of student debt for certain types of borrowers, such as Pell Grant recipients, since at least early summer, according to three people who know about the talks. That was one of the last things Biden thought about before making his announcement on Wednesday.
Democrats are hoping that Biden’s announcement will get younger voters to the polls in November. Over the past year, Biden’s approval rating has gone down, so Democrats are betting that Biden’s announcement will get younger voters to the polls.
Even though Biden’s plan is narrower than what he first proposed during the campaign, a Democratic pollster who worked with Biden during the 2020 election said, “He’ll get a lot of credit for following through on something that he was committed to.”
She said that student debt is a “gateway issue” for younger voters, which means that it affects how they think about housing costs and how to choose a career. In March, the Harvard Institute of Politics polled 18- to 29-year-olds and found that 59% of those polled wanted debt cancellation of some kind, either for all borrowers or for those with the most debt. However, student loans did not rank high on the list of things that 18- to 29-year-olds were most worried about.
Some supporters were already expecting to be let down.
The president of the NAACP, Derrick Johnson, said on Tuesday, “If the rumours are true, we have a problem.” The NAACP has been pushing Biden hard to do more bold things. He stressed that Black students have more to worry about when they start school than white students.
“President Biden’s decision on student debt can’t be the latest example of a policy that has left Black people, especially Black women, behind,” he said. “This is not how you treat Black voters who turned out in record numbers and gave 90% of their votes to save democracy again in 2020.”
John Della Volpe, who worked as a consultant for Biden’s campaign and is now the director of polling at the Harvard Kennedy School Institute of Politics, said that the details of Biden’s announcement were less important than the decision itself.
“It has to do with having faith in politics, the government, and our system. “It’s also about trusting the person, which in this case is Vice President Biden,” Della Volpe said.
Della Volpe said that getting rid of student debt “adds an additional tailwind to an already improving position with young people.” This is because young people are worried about expanding abortion restrictions and Trump’s return to the political scene.
Republicans, on the other hand, only see political benefits if Biden tries to cancel a lot of student debt before the midterm elections in November. They expect Democrats to face backlash, especially in states with a lot of working-class voters who don’t have college degrees. People who are against forgiving a lot of student debt also think that it could lead to lawsuits against the White House because Congress has never given the president the explicit power to cancel debt on his own.
The Republican National Committee criticized Biden’s expected announcement on Tuesday, calling it a “handout to the rich” and saying it would unfairly put the cost of college for the wealthy on lower-income taxpayers and those who have already paid off their student loans.
Rep. Kevin Brady, R-Texas, the top Republican on the House Ways and Means Committee, tweeted on Tuesday, “My neighbor, a detective, worked 3 jobs (including selling carpet) and his wife worked to make sure their daughter got a good college degree with no student debt.” “Big sacrifice. Now, someone else’s student debt has to be paid off with their taxes?”
Because Biden took a long time to decide, federal loan servicers were told to hold off on sending billing statements while Biden thought about it.
Industry groups were upset that the delayed decision gave them only a few days to tell borrowers, retrain customer service workers, and update websites and digital payment systems, said Scott Buchanan, the executive director of the Student Loan Servicing Alliance.
It makes it more likely that some borrowers will get a notice that they need to pay, he said.
“I think that’s the risk we’re taking at this late stage,” he said. “With 35 million borrowers who all have different loan types and statuses, you can’t just turn on a dime.”
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