President Joe Biden announced Wednesday he’ll forgive $10,000 in federal student loan debt for those who make a certain income — and $20,000 for Pell Grant recipients — as well as extend the pause on loan repayments, providing relief for thousands of borrowers in Connecticut.
Biden’s decision fulfills a promise he made during the 2020 presidential campaign to cancel a portion of student debt. While he didn’t go as far as some progressives wanted, the president is approving more loan forgiveness than originally anticipated.
The $20,000 cancellation for those who have Pell Grants hadn’t been previously reported until the morning of the announcement. Most recipients are from families who earn less than $60,000 a year and require greater financial assistance to attend school. In Connecticut, there were 77,065 Pell Grants recipients, according to 2021 data from the Education Data Initiative.
There are still eligibility restrictions, however, based on income. It’ll apply to individuals who earned less than $125,000 a year during the pandemic, or under $250,000 for married couples who jointly file taxes.
Biden said his administration will also extend the freeze on student loan repayments and interest accrual for another four months, until Dec. 31. The moratorium has been in place since the beginning of the pandemic in March 2020 and was poised to lift at the end of the month. Wednesday’s decision is the fifth and final extension.
And for people who have undergraduate school loans, they can cap their repayments at 5% of their monthly income, which is half of the rate of most current plans.
More than 45 million people across the U.S. hold a total of about $1.6 trillion in student loan debt. But even for those who are eligible for loan forgiveness, it would only be a fraction of what they still owe.
In Connecticut, 13.8% of its residents have student loan debt. There are 497,700 borrowers that have about $17.5 billion in student debt, according to the Education Data Initiative. The average debt for borrowers in the state is $35,162. And more than half of borrowers are under the age of 35.
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The U.S. Department of Education said the application to receive this relief will be available some time before the federal student loan repayments resume in January 2023. And because of the American Rescue Plan — Democrats’ pandemic relief package passed last year — the relief won’t be treated as taxable income.
“Today, we’re delivering targeted relief that will help ensure borrowers are not placed in a worse position financially because of the pandemic, and restore trust in a system that should be creating opportunity, not a debt trap,” said Education Secretary Miguel Cardona, who was the commissioner of Connecticut’s education department before his appointment to Biden’s Cabinet.
The news was celebrated by Democrats and young voters who have long been seeking relief from mountains of college debt. Proponents say it will provide financial help for people of color — especially Black borrowers — who tend to take out more student loans.
Some members of Connecticut’s congressional delegation have been working on the issue of addressing student loan debt for years. Rep. Joe Courtney, D-2nd District, has a bill that would allow borrowers who have public student loans to refinance them to an interest rate of 0% through the end of 2024.
“I have heard from constituents who cannot afford to buy homes, start families, or buy their basic necessities because of crushing student loan debt, and that is why I have called on the president to take this action,” Rep. John Larson, D-1st District, said in a statement. He’s a co-sponsor of Courtney’s bill.
Biden’s decision could give his party a boost ahead of the November midterm elections as Democrats are trying to hold on to narrow majorities in the House and Senate. Polling shows that a majority of Americans support some student loan forgiveness, though a recent survey from NPR/Ipsos found that an even larger majority want the government to focus on making college more affordable.
But there are also concerns about the broad cancellation of debt worsening inflation. A CNBC/Momentive poll released this week shows 59% of Americans have that fear. Most Republicans are opposed to wide-ranging student relief, claiming that it’ll also add to inflation on top of Democrats’ recently passed legislation on health care, climate change and tax policy.
“Once again, Democrats are replacing personal responsibility with another Government hand-out, spending taxpayers’ hard-earned money to pay for other people’s loans,” GOP Senate nominee Leora Levy said in a statement. “This will do nothing to address college affordability for CT families and will only encourage colleges and universities to raise their prices thinking that the Government will just bail the borrowers out again!”
Prior to the announcement, Biden’s administration has provided tens of millions of dollars in relief for former students who were defrauded by for-profit institutions. Before Wednesday, the Biden administration had approved nearly $32 billion in student debt loan relief for about 1.6 million people.
Biden had been skeptical of his authority to unilaterally forgive large amounts of student debt without Congress. A legal challenge to the move is anticipated.
Progressives and activists had been pushing the Biden administration to forgive a much higher amount of up to $50,000 per borrower and not use means testing to determine who could qualify for loans based on their annual income. Others want to go much further and cancel all student debt.
Sheetal Chhabria, a history professor at Connecticut College, was one of 1,000 college professors urging universal loan cancellation in a March letter organized by a debtors union, the Debt Collective. The signatories of the letter believe it would be “a powerful ﬁrst step in the process of reinvestment in quality public education.”
“I really find it morally objectionable to put a bunch of 18-years-olds into debt,” Chhabria said in an interview. But Biden’s decision “is a step in the right direction. It sends a signal that we can do this.”
“As a society, we need to decide education is important and to start funding it,” she added.