Biden cancels student debt for millions of Americans

President Biden on Wednesday announced his long-awaited plan on student debt. Borrowers making less than $125,000 a year will be eligible for $10,000 in federal loan forgiveness. That goes up to $20,000 for those with the greatest need. Biden also extended a pause on loan payments through the end of this year. Laura Barrón-López joins Amna Nawaz to discuss.

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  • Amna Nawaz:

    Well, President Biden today announced his long-awaited plan on student debt, an historic move to address the $1.6 trillion in federal loans held by 45 million Americans.

    In the plan, borrowers making less than $125,000 a year will be eligible for $10,000 in forgiveness. For Pell Grant recipients, that goes up to $20,000 in an effort to help those with the greatest need. And the president also extended the payment pause one final time through the end of this year.

    In remarks today, the president anticipated opposition from Republicans and said the relief was targeting low- and middle-income Americans.

  • President Joe Biden:

    I will never apologize for helping Americans working — working Americans and the middle class, especially not to the same folks who voted for a $2 trillion tax cut that mainly benefited the wealthiest Americans and the biggest corporations that slowed the economy, didn't do a hell of a lot for economic growth, and wasn't paid for, and racked up this enormous deficit.

  • Amna Nawaz:

    White House correspondent Laura Barrón-López has been following it all. She joins me here.

    Laura, good to see you.

  • Laura Barrón-López:

    Good to see you.

  • Amna Nawaz:

    So, big picture, how big a deal is this? What's the significance?

  • Laura Barrón-López:

    So, President Biden, it took him a long time to get to this decision, but it ultimately went further than what many expected.

    And so a big piece of this is what it did for those Pell Grant recipients. The student loan forgiveness for them is, as you noted, $20,000 forgiveness if they're making less than $125,000 a year. Roughly two-thirds of federal loan borrowers are Pell Grant recipients. And Black borrowers are twice as likely to receive Pell Grants as white borrowers.

    And just a reminder is that Pell Grants are federal tuition aid that doesn't necessarily have to be paid back for low-income Americans. And this addresses additional loans that they took out on top of that. The White House argues that Pell Grants no longer cover the same amount of tuition that they used to cover.

    And we spoke to Braxton Simpson today, who is a student who has some $40,000 in student debt. She's also an activist who works for an advocacy group that is really trying to make college more affordable. And here's what she had to say about how it impacts her.

  • Braxton Simpson, Student Borrower:

    When you come out of college, and you start a new job, and you're starting your new life, there's a lot of things that are being thrown at you. You're really focusing on adulting. You're picking up bills. You're trying to figure out what your next meal is going to be.

    So, having, of course, the cancellation of the $10,000 definitely helps to bring that and scale that down, makes things seem a little bit more attainable.

  • Laura Barrón-López:

    So, for borrowers like Braxton who are looking to get relief, it's their 2020 and 2021 tax years that will be assessed when they apply. And President Biden also said today that the Education Department will release a short and simple form in the coming weeks for people to apply for this relief.

  • Amna Nawaz:

    So we know some folks wanted the White House to go further, right? Progressives have been calling for up to $50,000 in forgiveness.

    How did the White House get to this number? And what are progressives saying about the plan now?

  • Laura Barrón-López:

    So, up until essentially today, progressives had been in President Biden's ear, had been in the ears of White House staff telling them to go further, because what everyone was expecting was for President Biden to forgive the $10,000 in student debt.

    But this $20,000 for Pell Grants, that took it a step further and was something that progressives were fighting for a lot. And I also spoke to Wisdom Cole of the NAACP today. And he said that he's looking for the White House to go even a step further.

    Wisdom Cole, National Director, NAACP Youth and College Division: This is a great first step in the right direction in the fight to cancel student debt.

    We have been fighting for quite some time now, pushing the administration to cancel a minimum of $50,000 or more. The idea that now we are really having an open conversation around what is possible and really dreaming about a future where debt is not going to be something that is going to be holding back millions and millions of Black and brown borrowers around the country who are wanting to see a better future, wanting to become homeowners, business owners, and have discretionary wealth-building income.

  • Laura Barrón-López:

    And so, like Wisdom Cole, who leads their Youth Division for the NAACP, a lot of progressives are going to reset once those payments start again next year and start pushing the White House to potentially forgive even more for non-Pell Grant recipients.

  • Amna Nawaz:

    So the administration announces this loan forgiveness.

    They also announced changes to how loans are to be repaid, right? Tell us about that.

  • Laura Barrón-López:

    Yes, so this is another big component.

    And this is essentially new income-based repayment plan. And so what this does, is it makes it so borrowers repay 5 percent of their disposable income per month, rather than 10 percent. No monthly payments for people making less than approximately $15 an hour. It forgives loans of $12,000 or less after 10 years, instead of 20, and no monthly interest for people making their repayments.

  • Amna Nawaz:

    So, among the critics, we should note there are people who say this will worsen inflation, right? Do we know what kind of impact it could have on the economy?

  • Laura Barrón-López:

    So the White House came out prepared for those arguments. And, essentially, what they're saying is that the loan repayments starting next year happening at the same time as there's targeted debt relief, they argue it's going to offset.

    They also say that the economists that they're talking to, be it at analyst firms like Moody's, that it will be neutral or de-inflationary. Now, of course, there are a number of economists, even Democratic ones, that don't agree with that.

    The Committee for the Responsible Federal Budget actually estimated that it would cost some $400 to $600 billion. And so I spoke to Jason Furman, an economist and Democrat who worked for the former President Obama, and he was not happy with this announcement today.

    Jason Furman, Former Chair, White House Council of Economic Advisers: I think this is a terrible policy for the point in time we're in as a country. It's nearly half-a-trillion dollars of gasoline being thrown on what is already an inflationary fire that we're dealing with.

    The economy cannot absorb this money without generating more inflation, without generating bills that will have to be paid in the future as well. So you're helping one group in the country and hurting a lot of other people in the process.

  • Laura Barrón-López:

    Now, the White House's response to that is essentially that this is something that the president believes is fair. It's something that he wanted to take action.

    Now, again, he initially wanted Congress to do this. He didn't want to have to use his executive action to forgive the $10,000 in student debt, but ultimately felt that it was necessary.

  • Amna Nawaz:

    You mentioned fair. And there has been this question around fairness, right? We have heard it from the beginning of the talk about student loan forgiveness from Republican lawmakers.

    Also, there was a reporter who shouted out a question to President Biden on this, people who argue this is unfair to people who didn't go to college or people who have already paid back their loans. What does the White House say to that?

  • Laura Barrón-López:

    So, first, I think we need to look at how popular the provision is, which is actually recent polling from NPR found that the $10,000 in forgiveness alone is actually what's popular with the American public. Some 55 percent of Americans support it; 35 percent do not support it.

    But going beyond that is where things can become less popular with the American public. And so, again, some Democrats like Jason Furman agree with Republicans who are saying that this isn't necessarily fair, and what about the students who already repaid all of their loans? And so he said that it could definitely become difficult for the White House to explain that.

  • Jason Furman:

    We're very constrained as a country. Who is your priority to help? Is it a couple of making $250,000? Is it a single 24-year-old making $75,000? I just don't think those should be the top priorities for policymakers.

  • Laura Barrón-López:

    Now, ultimately, again, we — I have spoken to a lot of students across the country in the past year, students like Braxton Simpson.

    And they say that — every time I ask them, what's the one thing that you would like to see from President Biden now that he was elected to office, and the first words out of their mouth were student debt.

    And so this is what this is what Braxton Simpson had to say in response to that fairness question.

  • Braxton Simpson:

    I think that students everywhere are going to be excited about that. It's probably going to get them out to vote, knowing that there is a possibility and that the administration does have them on their mind when it comes to their education, funding their education, and allowing students not to focus solely on funding their education, having to work to make ends meet just to go to school, but being able to actually focus on school itself.

  • Laura Barrón-López:

    And so, just like Braxton, that's a big thing that Democrats are thinking could potentially play well with young voters.

    President Biden's numbers with Gen Z voters, with millennials has not been good in recent months. And so potentially a number of Democratic strategists I have spoke to say that these voters, these young voters are going to be key potentially in swing states heading into November.

  • Amna Nawaz:

    And we will see how much of a difference it makes or doesn't.

    Laura Barrón-López, thank you so much.

  • Laura Barrón-López:

    Thank you.

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