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The White House is considering income limits to meet the conditions for easing student loans, which would exclude higher-income Americans as President Biden approaches a solution, according to three people familiar with the administration’s discussions.
The administration is considering various ways to simplify some student loan obligations through enforcement actions. In recent weeks, senior Biden staffers have explored limiting relief to people who earned less than $ 125,000 or $ 150,000 as individual senders in the previous year, people said. The plan will set the threshold at about $ 250,000 or $ 300,000 for couples who file their taxes together, people said. No final decisions have been made, but those familiar with the matter emphasize that planning is smooth and subject to change.
President Biden has the power to forgive student loan debt. Will he do it? And what would that mean for average Joe? (Video: Monica Akhtar, Sarah Hashemi / Washington Post)
Biden signaled he was ready to cancel student loans
The White House also weighs exactly how much student debt to eliminate for each borrower. Biden told reporters this week that the amount would be less than $ 50,000 per person. Administration officials have also signaled that the White House will cut at least $ 10,000 per qualified borrower, people said, embracing a position Biden himself appears to have backed in a private meeting with the Spanish-speaking group in Congress. The administration also discussed limiting the waiver to bachelor’s degree loans, with the exception of those who have taken out loans for professional degrees in areas such as law and medicine, people said.
“There are various suggestions coming to the administration on how to structure this,” said one person in the discussions, who spoke on condition of anonymity to cover private conversations. “In particular, last week, Congress administration and staff focused on debt cancellation on how best to respond to the president’s desire to ensure that the most vulnerable students with student debt benefit from any action.
The Washington Post reported for the first time this week that Biden had signaled at a recent meeting of Spanish lawmakers that he planned to take significant action to ease student debt. On Thursday, the president publicly confirmed that he was “carefully” considering the issue and expected to make a decision “in the next few weeks”. The administration has already extended the Trump administration’s moratorium on loan repayments, originally sparked by the coronavirus pandemic, until Aug. 31.
Biden’s latest comments have sparked much debate over whether canceling student debt will really benefit needy borrowers or, above all, help wealthier college graduates who choose to take out solid loans. White House officials are considering adding income cuts to thwart Republican arguments – but backed by centrist Democrats – that debt forgiveness rewards higher-income college graduates who don’t need federal aid.
A White House spokesman declined to comment on internal discussions, but said in a statement that the administration was considering what options could be taken to provide relief, while citing the president’s support for reducing $ 10,000 in student debt through legislation. The administration has also taken action to release more than $ 17 billion in loans to more than 700,000 borrowers, the spokesman said. Continuing the interest rate break and paying off student loans has saved tens of billions for 41 million student borrowers, the spokesman said.
But the loan forgiveness in question would go much further. In 2019, the last year for which data is available, 97 percent of all student obligations are held by people earning below $ 150,000 per single and $ 300,000 per couple, according to Matt Bruenig, founder of the People’s Policy Project and a left-wing think tank. Canceling a $ 10,000 debt for each student borrower would cost approximately $ 245 billion, according to the Nonprofit Responsible Federal Budget Committee, which argues to limit federal debt. The average amount borrowed from college graduates in 2020 who took out loans to pay for their diplomas is $ 28,400, according to the college council. Fifty-four percent of borrowers owe less than $ 20,000, while 10 percent owe at least $ 80,000.
Even significantly sharper income cuts are unlikely to dampen critics of student loan forgiveness. Student debt is held mostly by Americans with higher than average incomes, and the poorest 20 percent of Americans in terms of income hold only 8 percent of total student debt, according to the People’s Policy Project. In 2019, 44% of adults who earned below the median of $ 47,500 had no education outside of high school, compared to only 19% of those who earned more than that. Conservative economists and Republicans have already spent a week in Biden’s disgrace over the idea of forgiving college loans.
“This is the democratic base – ascending mobile urban professionals with high incomes. Subsidizing college graduates with often expensive diplomas will really offend those who didn’t go to college, as well as those who paid off their student loans, “said Brian Riddle, a conservative political analyst at the Manhattan Institute, center-right. brain trust. “It’s a slap in the face.”
But Biden faces significant pressure to take significant action, especially during the collapse of the rest of the White House’s economic program aimed at cutting spending on health care, housing and other households. Spaniards in Congress and black factions in Congress are among those who have forced the administration to take aggressive action, in part because black Americans make up a disproportionate share of student debtors. Black people make up 16% of the US population, but owe 23% of the nation’s student debt.
The United States could forgive thousands of student loans, but never told borrowers
A spokeswoman for Alexandria Ocasio-Cortez (DN.Y.), who is urging the White House to forgive student debt, said the administration should cancel up to $ 50,000 per borrower and expressed concern that $ 10,000 would not be a significant improvement for many people. . For Americans with a debt of $ 30,000 or more, canceling $ 10,000 of that amount will not significantly affect their monthly payment obligations, a difficulty exacerbated by declining inflation-adjusted wages for millions of workers, she said.
While student debtors, such as college graduates in general, have higher incomes on average than Americans in general, those who owe student loans are much less wealthy than most college graduates. More than half of student debt is held by people who are essentially destitute, according to the People’s Policy Project. The richest 20 percent of the population have only a small portion of student debt.
“I don’t believe in a break, especially for so many front-line workers who are drowning in debt and are likely to be excluded from relief,” Ocasio-Cortez said. She added that the income threshold across the country does not take into account the much higher cost of living in some parts of the country. “Canceling a $ 50,000 debt is where you really indulge in inequality and racial wealth. It’s not $ 10,000. ”
Economist Larry Summers, who works for Presidents Bill Clinton and Barack Obama, said he would prefer Biden to endorse policies aimed at half of the non-college population, who generally have less money than those who do. they do. He also said there were “concerns” that canceling student debt could increase inflation, depending on the total amount of loans forgiven.
However, Summers stressed that the current policy of the administration – a moratorium on loan payments – is less targeted than one that would reduce the debt of a certain segment of the population.
“I would prefer to give priority to people who have not gone to college, rather than people who have. That’s the point, “Summers said. “But it’s better to do a limited, focused program than a complete relief.”
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