Biden announces long-awaited student debt relief plan

President Joe Biden has announced his long-awaited plan to deliver on his campaign promise to provide millions of Americans with $10,000 (£8,500) in debt cancellation.

In a tweet, Biden announced that borrowers earning less than $125,000 a year or households earning less than $250,000 would be eligible for $10,000 in loan forgiveness.

For Pell Grant recipients, which are reserved for the most financially needy undergraduate students, the federal government will cancel federal loan debt of up to $10,000.

Mr. Biden will also suspend payments on federal student loans, which he called “for the last time,” until the end of 2022.

If his plan survives a legal challenge that is almost certain to come, it could deliver a windfall for much of the country on the eve of this fall’s midterm elections.

According to federal data, more than 43 million people have federal student debt, with an average balance of $37,667.

Nearly a third of borrowers owe less than $10,000, and about half owe less than $20,000. The White House estimates that Mr. Biden’s announcement will wipe out about 20 million people’s federal student debt.

Proponents say the cancellation will narrow the racial wealth gap — black students are more likely to take out federal student loans than others.

Four years after earning a bachelor’s degree, black borrowers, on average, have nearly $25,000 more debt than whites, according to a study by the Brookings Institution.

Still, as Mr Biden weighs how much to cancel and for whom, the move is unlikely to excite any faction that has been battling for influence.

Mr. Biden has faced pressure from liberals for broader relief for hard-hit borrowers, while moderates and Republicans have questioned whether any broad forgiveness is fair.

The delay in Mr Biden’s decision will only increase expectations that his own aide’s admission represents a win-win situation for politics.

Just days before millions of Americans prepare to know when their next student loan bill is due, the coronavirus pandemic-era payment freeze continues.

This is the closest the government has come to the end of the payment freeze extension, which is currently set to end on August 31.

The details of the plan have been closely guarded as Biden weighs his options. The government said on Wednesday the education ministry would release information in the coming weeks for eligible borrowers to sign debt relief agreements.

Some cancellations will be automatic if the department has access to their income information, but others will need to fill out a form.

Only current students with loans disbursed before July 1, 2022 are eligible for forgiveness. Mr. Biden would also propose capping the amount borrowers make monthly on undergraduate loans at 5 percent of income.