Biden announces student loan debt forgiveness for some borrowers

The changes could significantly impact Georgia, where 1 in 6 residents have student loan debt

President Joe Biden said Wednesday he plans to eliminate up to $10,000 in federal student loan debt for borrowers with an annual income of less than $125,000.

Biden also will continue what federal officials describe as a “final” extension on the pause in federal student loan payments through December. The federal government paused student loan repayments in March 2020, at the start of the coronavirus pandemic, as the nation grappled with the economic impact of the crisis. They’ve extended the pause several times, and it was scheduled to expire at the end of this month.

Additionally, Biden plans to cancel up to $20,000 in student debt for Pell Grant recipients whose loans are held by the federal government.

As many as 43 million federal student loan borrowers will benefit from the relief plan, including 20 million who will have their debt completely erased, according to senior White House officials. Those with Parent PLUS loans held by the U.S. Department of Education are included in the relief plan, and current students also are eligible, officials said.

Biden said his decision — which Republicans said is too costly for taxpayers and will worsen inflation — will lift a debt burden that prevents many from buying a home, starting a family or launching a business.

“I believe my plan is responsible and fair. It focuses the benefit on middle-class and working families. It helps both current and future borrowers and it will fix a badly broken system,” he said.

The debt relief plan could face legal challenges, making the timing of any relief uncertain.

Student loan debt has become a challenge for a rising number of Georgians. About 1 in 6 Georgians have debt. The average debt for Georgians, nearly $42,000, is among the highest in the nation, federal statistics show.

Biden’s announcement is consistent with his campaign pledge to eliminate up to $10,000 in debt.

Some have urged Biden to do even more. Both of Georgia’s U.S. senators, Democrats Jon Ossoff and Raphael Warnock, have pushed for the cancellation of up to $50,000 in student loans. Warnock said the move will help many Georgians get their financial footing but called it “only a first step.”

Clark Atlanta University sophomore Jayden Williams, who is also president of the Georgia NAACP’s youth and college division, said he’ll continue to call for forgiveness of all student loan debt.

Doing so, he said, would show that elected officials “are fighting on our behalf.” He noted that $10,000 doesn’t cover the cost of a full semester at some schools.

Last month, he rallied with student activists from Georgia outside the Education Department in Washington, D.C.

”The work does not stop. The work just got 10 times harder,” Williams said. “People are going to think we got what we need.”

Others contend Biden’s move will worsen inflation and set a bad precedent.

“Workers are being crushed by inflation, and instead of helping the lowest 10% of income earners, Biden is throwing taxpayer dollars at the highest 10%. This is one of the worst dollar-for-dollar investments we could possibly make in our country,” U.S. Rep. Buddy Carter, R-Pooler, said in a statement.

Federal education officials also announced Wednesday they are proposing a new income-driven repayment plan aimed at reducing monthly payments for lower- and middle-income borrowers. It would cut in half — from 10% to 5% of discretionary income — the amount that borrowers have to pay each month on their undergraduate loans, while borrowers with both undergraduate and graduate loans will pay a weighted average rate.

The changes would forgive loan balances after 10 years of payments, instead of the current 20 years under many income-driven repayment plans, for borrowers with original loan balances of $12,000 or less.

What’s proposed

President Joe Biden said he will cancel up to $10,000 in federal student loan debt for many borrowers — and double that amount for Pell Grant recipients.

The forgiveness is expected to apply to Americans earning under $125,000 per year, or $250,000 per year for married couples who file taxes jointly.

The president also is extending a pandemic-era pause on federal student loan payments through Dec. 31.

What’s next

Roughly 8 million borrowers may be eligible to receive relief automatically because they’ve already submitted their income data to the U.S. Department of Education, White House officials said. Some loan recipients will need to complete an application to show they meet income criteria.

For borrowers who will have to repay loans when the pause ends, once a loan hasn’t been paid for 90 days or more, it’s labeled delinquent and will be reported to national credit reporting agencies, which could hurt your credit rating.

After 270 days, the loan will be considered in default. Consequences vary depending on the type of loan, but can include losing eligibility for additional federal student aid.

By the numbers: Georgia and student loan debt

Here are some key numbers concerning student loan debt in Georgia:

1,639,600 — the number of borrowers who live in Georgia, which ranks seventh nationally.

$41,600 — the average borrower balance, which is third nationally, behind Washington, D.C., and Maryland.

15.4% — the percentage of Georgia residents with student loan debt.

9% — the percentage of Georgia borrowers in 2021 who had past-due accounts greater than 90 days. The national average is 8%.

70,700 — the increase in Georgia borrowers since 2016. Only Texas and Florida have had a larger increase in borrowers.

68,000 — the number of borrowers in Georgia who are 62 or older.

Sources: Federal Reserve Bank of New York Consumer Credit Panel/Equifax and Education Data Initiative.

Staff writers Tia Mitchell and Eric Stirgus contributed to this report. The Associated Press also contributed to this report.