Washington: Millions of people saddled with thousands of dollars in student debt were waiting for US President Joe Biden to officially grant them some financial relief on Wednesday, August 24, as he was set to announce debt cancellation, delivering on one of his campaign promises ahead of the midterm elections.
“In keeping with my campaign promise, my administration is announcing a plan to give working- and middle-class families breathing room,” Biden said in a statement on Wednesday ahead of his official announcement.
Though the full details are expected to be announced later, the plan would wipe out $10,000 (€10,022) of debt for many, and a further $10,000 for those whose income falls below $125,000.
“Both of these targeted actions are for families who need it the most: working and middle-class people hit especially hard during the pandemic,” Biden said at the White House on Wednesday afternoon.
Biden will also extend a moratorium on student loan payments until the end of the year – for the “final time,” according to the White House.
Former students – and current consumers – carry a massive $1.75 trillion in student debt. According to federal data, some 43 million people are burdened with an average debt of $37,667.
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The White House estimates that the debt relief could completely erase the student debt of about 20 million people who owe less than $20,000.
“That’s 20 million people who can start getting on with their lives,” Biden said. “All this means, people can start to finally crawl out from under that mountain of debt. To get on top of their rent and utilities. To finally think about buying a home or starting a family or starting a business.”
According to a study by the Brookings Institution, debt cancellation would reduce the wealth gap between white and Black people who took out loans, with the latter owing, on average, $25,000 more because they had needed to borrow more in the first place.
Some Democrats have called for debt forgiveness of up to $50,000 to enable younger people to save for bigger purchases such as down payments for homes.
The decision could also give a boost to the Democrats ahead of the midterm elections in November.
Some economists have warned that debt forgiveness could prop up inflation by enabling further spending.
Republicans have said it unfairly benefits high-income people who do not need the relief while low-income taxpayers would have to cover the costs.
The Republican National Committee on Tuesday called it a “handout to the rich.”
Republicans may also be hoping for a backlash against the decision in states with a large number of working-class voters who did not go to college.
But student debt relief has broad support from young voters, and, with his dangerously low approval ratings, Biden will be hoping to motivate those young voters to come out on Election Day, November 8.
Featured image: Reuters