The administration of United States President Joe Biden has announced that it will eliminate an estimated $39bn in student debt, in its latest attempt to fulfill one of the Democrat’s central campaign promises.
Friday’s announcement from the Department of Education is slated to affect nearly 804,000 borrowers enrolled in federal income-driven repayment plans, which adjust the amount owed per month according to salary and family size.
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The department, however, has framed Friday’s decision as an effort to correct past wrongs.
Under current regulations, a borrower is eligible for student loan forgiveness after completing 240 to 300 monthly payments — roughly the equivalent of 20 to 25 years. After that time, the rest of the debt is generally absolved.
But “inaccurate payment counts have resulted in borrowers losing hard-earned progress toward loan forgiveness”, the department said.
“At the start of this Administration, millions of borrowers had earned loan forgiveness but never received it. That’s unacceptable,” Under Secretary of Education James Kvaal said in Friday’s press release.
“Today we are holding up the bargain we offered borrowers who have completed decades of repayment.”
Supreme Court setback
But the move is also the Biden administration’s latest action to fulfil a key tenet of his domestic economic platform: to free many households from the burden of student debt.
That goal was dealt a significant setback last month when the Supreme Court ruled the administration did not have the constitutional authority to erase nearly $400bn in student debt.
Biden had sought to exercise his administration’s powers under the Higher Education Relief Opportunities for Students Act of 2003, which allows the Secretary of Education to waive or offer relief to financial aid recipients during national emergencies.
Citing the COVID-19 pandemic, Biden unveiled a plan in August 2022 to wipe out between $10,000 and $20,000 in federal student loan debt for borrowers earning less than $125,000.
In a speech announcing the plan, Biden estimated 43 million people would be able to benefit.
But the right-leaning Supreme Court ruled in a 6-3 decision that the plan overstepped Biden’s executive authority.
The administration lacked “clear congressional authorisation” for the debt relief scheme, the conservative majority wrote.
Still, Biden struck a defiant note as he responded to the court’s decision, calling it “a mistake”.
“I know there are millions of Americans — millions of Americans — in this country who feel disappointed and discouraged, or even a little bit angry, about the court’s decision today on student debt,” he said in a June 30 speech. “I must admit I do, too.”
He also blamed his opponents in the Republican Party for derailing the programme, while pushing for tax breaks for the wealthy.
“Republican officials just couldn’t bear the thought of providing relief for working-class and middle-class Americans,” he said, promising to find new paths for student debt relief.
Campaigning on ‘Bidenomics’
Biden is currently in the midst of his campaign for reelection, as part of the 2024 presidential race. Despite facing criticism for high inflation and government spending, Biden has made “Bidenomics” — his economic platform — a central part of his messaging to voters.
Federal student loans amount to approximately $1.6 trillion in money owed, the White House estimated in 2022. That total affects nearly 45 million people.
But Republicans were quick to criticise Friday’s latest debt-relief effort, calling it yet another example of the Biden administration exceeding its authority.
“Biden’s unconstitutional loan forgiveness scheme is a slap in the face to hard-working taxpayers that have dutifully paid off their student loans,” Representative Lisa McClain of Michigan wrote on Twitter. “Rest assured, come hell or high water, I will fight this blatant overreach until the end.”
Biden even received flak from fellow Democrat and rival presidential candidate Marianne Williamson.
“Be of good cheer, kids,” she wrote on Friday. “You’ll get relief in 20 or 25 years!”