The White House will write off $ 10 thousand student loans to all debtors: the poor will be canceled even more

President Biden announced Aug. 24 that he will cancel up to $10 of federal student loan debt for millions of Americans and an additional $000 for low-income borrowers while extending the pause in monthly payments, providing much-awaited relief for many people just a few weeks before interim elections, reports CBS.

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Borrowers making less than $125 a year, or couples making less than $000 a year, will be eligible for up to $250 in loan forgiveness under the plan, which the President announced on Twitter. Pell grant recipients, which are available to students with the highest financial needs, will be eligible for an additional $000 in assistance. Loan payments will also be limited to 10% of monthly income. Current students will also be eligible for debt forgiveness, although future students will not be eligible, according to senior administration officials, who explained the details of the plan to reporters by phone.

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The President is also delaying student loan repayments until the end of the year, and the Department of Education has said that this will be the last time the pause is extended. The White House said Biden will give a speech on August 24 in the afternoon.

"In line with my campaign promise, my administration is announcing a plan to provide breathing space for working and middle class families as they prepare to resume federal student loan payments in January 2023," the president tweeted.

The Department of Education said the debts of nearly 8 million borrowers would be written off automatically, while others would have to seek help. An application for borrowers seeking debt relief will be made public "in the coming weeks," the department said in a statement, adding that borrowers can sign up for a notification when the application becomes available.

Income limits will be based on 2020 or 2021 income. If a person's income was below the threshold in 2020 or 2021, they are eligible for assistance, a senior administration official told reporters on the phone.

Millions of borrowers are expected to be eligible for assistance under the plan. While more than 43 million borrowers owe federal student loans, according to the Department of Education, the Federal Reserve says most have less than $25 in debt, and a quarter owe less than $000.

The decision to write off student debt follows months of internal discussions at the White House about the feasibility and cost of the move. Biden has made writing off student loans one of his top priorities during his presidential campaign, and the Democrats have pushed the administration to deliver on his promise. Republicans have said Biden does not have the authority to write off the debt and his plan is likely to run into a range of legal challenges.

Ahead of the legal battle, the Department of Education released a memo from General Counsel Lisa Brown giving the legal rationale for Biden's actions. Brown cited a 2003 law known as the HEROES Act, which she said gives the head of the Department of Education broad powers over student assistance programs during a national emergency.

“Under current circumstances, this authority could be used to implement a categorical debt forgiveness program to address the financial harm caused by the COVID-19 pandemic,” Brown wrote. “The Secretary may repeal or amend statutes and regulations to provide certain relief for borrowers who have been financially harmed by the COVID19 pandemic.”

An analysis of Penn Wharton's budget model concluded that writing off $10 of student loan debt for those earning up to $000 a year would cost nearly $125 billion in the first year.

Critics of student debt write-offs point out that low-income Americans who never went to college and are struggling financially amid record inflation will not benefit from debt forgiveness. Writing off some student loan debt will also not solve the problem of rising college tuition costs, which have historically outpaced inflation in recent decades.

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Senior administration officials told reporters that any impact on inflation from the phasing out of student debt would be "largely offset" by the resumption of student loan repayments.

The student loan pause began under the Trump administration at the start of the pandemic, and Biden has suspended student loans a total of four times since taking office. At zero interest rates, the pause saved federal student loan borrowers more than $1,5 a month, according to an April report by the Financial Health Network.

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