White House wants to forgive each debtor $10 in student loans

The White House plans to write off student debts in the amount of $10 for each borrower. Discussions about how to structure loan forgiveness for millions of Americans have been going on for months. Writes about it The Washington Post.

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U.S. President Joe Biden had hoped to make the announcement this weekend at his graduation ceremony at the University of Delaware, sources said, but plans changed after the May 24 shooting in Texas.

The White House's intentions included debt relief for Americans who earned less than $150 in the previous year, or less than $000 for married couples.

Sources speaking on condition of anonymity warned that some details of the plans could change before the White House makes a formal decision.

The decision was preceded by months of uncertainty over the fate of student debt for tens of millions of Americans, with Biden skeptical about canceling loans but under pressure from his falling ratings among young voters.

The decision, among other things, will provoke new disputes between Democrats and Republicans over federal spending and could prove to be a decisive issue during the campaign, as GOP lawmakers have already said that this idea amounts to wasteful spending.

The White House said that the final decision on this issue has not yet been made. Biden said he would make a decision on student debt in "the next couple of weeks" as early as April 28, a month ago.

“No decisions have been made yet,” White House spokesman Vedant Petal said May 26.

The Committee on the Federal Budget, an unbiased think tank, estimates that a $10 debt write-off for a single borrower could cost about $000 billion.

On the subject: Seven Ways To Write Off Your Student Loan Debt

However, the resumption of payments for borrowers that have been suspended since March 2020 will bring additional money to the federal treasury.

The think tank said in March that the suspension of payments had cost the federal government $100 billion.

The White House has been looking for economic measures it could take without congressional approval after the failure of Biden's economic program late last year. But while the administration has studied polling results that show a vast majority of young voters support debt relief, the policy behind the move remains unclear.

Biden's support rating in the economy has fallen amid the fastest price increases in four decades, and his plans for better housing, health care and child poverty have been stymied by failed talks with Senator Joe Manchin.

During the 2020 presidential campaign, he promised to forgive at least $10 of debt to every borrower.

Most of the country's 41 million student borrowers would benefit from such a solution. According to the latest figures from the Department of Education, a $10 debt relief for everyone with federal student loans would settle the balance sheets of about a third of borrowers and cut overall debt by at least half for another 000%. However, it is not clear how income restrictions will affect these figures. Matt Brünig, founder of the leftist think tank People's Policy Project, estimates that about 20% of all student debt is from people making less than $97 per person and $150 per couple in 000.

The White House is not expected to reveal all the details of the process that borrowers use to write off their debts. But it can be quite difficult in terms of logistics.

For example, the administration is introducing an income ceiling for those who are eligible to receive assistance to ensure that high-income individuals do not receive assistance they do not need. But there are barriers to using the proceeds for debt relief. Departments of Education and the Treasury cannot freely exchange borrower tax information.

Based on tax data, it is possible to exclude the millions of low-income Americans who don't file taxes but have student loan debt. The process by which people will certify that their income meets the requirements can create problems for the government when verifying information. Even asking borrowers for forgiveness can limit coverage. And since the Department of Education will likely take months to implement any program, the political gain may be limited.

Supporters of student debt relief, including Senator Elizabeth Warren and Senate Majority Leader Chuck Schumer, have urged the administration to go much further and cancel at least $50 per borrower, if not all outstanding federal education loans.

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They say lowering the student loan burden will help stimulate the economy and narrow the racial wealth gap as black borrowers carry a disproportionate amount of debt.

But some economists argue that generously writing off loans to college graduates is irresponsible and costly.

The Federal Budget Committee has estimated that approximately 70% of the payments will go to those in the upper half of the income band. Debt write-offs, however, say it does nothing to solve the problem of college costs or the troubled credit system. It's unclear whether people who need to take out a loan to go to college, for example this fall, will be eligible for brand new loan forgiveness.

However, even by limiting forgiveness to $10, the Biden administration could help the people who may need it most - those who defaulted on their loans. Student loan defaults and delinquencies were common among borrowers with less than $000 in debt prior to the suspension of federal student loan payments, according to the Federal Reserve. Economists say that borrowers with the least amount of debt often struggle to repay their loans.

The narrowing of the write-off parameters is in line with the Biden administration's targeted approach to debt relief. The administration has already canceled $18,5 billion in loans to more than 750 people by temporarily expanding or streamlining existing forgiveness programs, including those designed to help government employees and borrowers scammed by their colleges.

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