President Joe Biden campaigned on $10,000 of student debt cancellation, but under pressure from allies to go bigger, he has yet to take action. With the federal student loan payment pause set to expire on Aug. 31, he will reportedly make an announcement on debt cancellation as well—and it’s expected to be $10,000 per borrower with an income cap of $125,000.
Student debt relief of $10,000 per borrower with no income cap would wipe the slate clean for 1 in 3 borrowers. That’s big. But it does little to erase significant racial disparities in student debt, leaving a higher share of Black people with student debt after cancellation than the share of white people with student debt now. As of 2016, about 1 in 3 people owed more than they originally borrowed, but it was 2 in 3 for Black borrowers.
A CNN report on Biden’s plans drops one very interesting tidbit: “In addition to that baseline of student loan debt forgiveness for individuals who fall under a certain income level, administration officials have also recently discussed the possibility of additional forgiveness for specific subsets of the population, according to sources familiar with internal discussions in the administration.”
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What does that mean? We don’t know yet, but it could be very important. The Biden administration has already started making the Public Service Loan Forgiveness program work to actually forgive the loans of people whose work qualifies them, and it has made fixes to income-driven repayment for low-income borrowers. That’s in addition to a series of targeted cancellations of debt for people defrauded by for-profit colleges.
Further targeting of specific subsets of borrowers could improve the overall equity of a $10,000 universal cancellation, but it could also dramatically complicate things. The plan for an income cap may already prove extremely difficult to administer since the Education Department doesn’t know the incomes of student borrowers, and therefore couldn’t automatically implement loan forgiveness. People would have to prove their income levels and apply for relief, which would be a substantial burden for applicants and the agency processing their applications alike. The application process would also be likely to effectively exclude many of the people who need the relief the most. The details of this plan will be important.
So there’s a lot we don’t know. One thing we do know is that $10,000 of student debt relief will draw rage from multiple directions—from people who would oppose any relief (including people who would oppose literally anything Biden does) and from people who have been making the case that $10,000 is not enough to right a system in which so many people have been paying for years and actually owe more than when they started. Another thing we know is that despite the howling about loan cancellation and inflation, $10,000 of relief will have an extremely small impact on inflation. This will not stop the howling.
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