White House Officials Weigh Income Limits for Student Loan Forgiveness 2022-04-30 08:00:00

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The White House is considering an income cap for eligibility for student loan forgiveness that would exclude high-income Americans, as President Biden He is close to making a decision on this matteraccording to three people familiar with management discussions.

The administration is considering various ways to relieve some student loan debt through enforcement action. In recent weeks, the people said, top Biden aides have considered limiting the benefit to people who earned less than $125,000 or $150,000 as individual providers in the previous year. People said this plan would set the floor at about $250,000, or $300,000 for spouses who file their taxes jointly. No final decisions were made, and people familiar with the matter stressed that planning was flexible and subject to change.

Biden indicates he’s open to canceling student loans

The White House is also balancing the amount of student debt that needs to be eliminated for each borrower. Biden indicated to reporters this week that the amount would be less than $50,000 per person. Administration officials also noted that the White House would cut at least $10,000 for each eligible borrower, People said, embracing a position that Biden himself appeared to support in a private meeting with the Hispanic caucus in Congress. The administration also discussed limiting the forgiveness to bachelor’s loans, except for those who took out loans for professional degrees in fields such as law and medicine, People said.

“There are various proposals coming up around the administration about how to structure this,” said one of the people involved in the discussions, who spoke on the condition of anonymity to reflect private conversations. “Over the past week in particular, administration and congressional staff have focused the conversation on debt forgiveness on how best to satisfy the president’s desire to ensure that the most economically vulnerable people with student debt benefit from any action.”

Washington Post first mentioned This week, Biden signaled to a recent meeting of Hispanic lawmakers that he plans to take significant action on student debt relief. On Thursday, the president publicly confirmed that he is “taking a close look” at the matter and expects to make a decision “in the next two weeks.” The administration has already extended the Trump administration’s moratorium on loan repayments, which originally pushed for it Corona Virus Pandemic until August 31.

Biden’s recent comments sparked a major debate about whether canceling student debt would really benefit borrowers in need, or primarily help wealthier college graduates who opted for hefty loans. White House officials are looking at adding income cuts to pre-empt arguments made by Republicans — but also by centrist Democrats — that debt forgiveness rewards high-income college graduates who don’t need federal assistance.

A White House spokesperson declined to comment on internal discussions, but said in a statement that the administration was assessing options that could be taken to provide relief, while noting the president’s support for reducing $10,000 in student debt through legislation. The spokesman said the administration has also taken measures that have resulted in the repayment of more than $17 billion in loans to more than 700,000 borrowers. The spokesman said that the continuation of the temporary halt in interest and payment of student loans saved tens of billions for the sake of 41 million student borrowers.

But the exemption from the loan under consideration will go much further. In 2019, the most recent year for which data is available, 97 percent of all student debt was owned by people with incomes below the minimum income of $150,000 for each individual and $300,000 for a married couple, according to Matt Bronnig, founder of the People’s Policy Project, Center Left thinking. Canceling $10,000 of debt for each student borrower would cost roughly $245 billion, according to the nonprofit Committee on Responsible Federal Budget, which advocates for limiting federal debt. The average amount that college graduates in 2020 who borrowed to pay for their degrees were $28,400, According to the College Board. Fifty-four percent of borrowers owe less than $20,000, while 10 percent owe at least $80,000.

Even the sharpest cut to income is unlikely to appease critics of student loan forgiveness. Most student debt is owned by Americans with above-average incomes, and the poorest 20 percent of Americans, as measured by income, own only 8 percent of the total share of student debt, according to the People’s Policy Project. in 2019, 44 percent of adults who earned less than the average $47,500 had no education after high school, compared to just 19 percent of those who earned more than that. Economists and conservative Republicans spent the week ripping Biden on the idea of ​​foregoing college loans.

This is the democratic norm – upwardly mobile, high-income urban professionals. Supporting college graduates with expensive college degrees often really hurts those who didn’t go to college, as well as those who paid off their student loans, said Brian Riddell, a conservative political analyst at the Manhattan Institute, who is from the center-right. think tank. “It’s a slap in the face.”

But Biden is under great pressure to take substantive action, particularly while the rest of the White House’s economic agenda aimed at lowering health care, housing and other household costs is collapsing. Among those who have pushed the administration to take aggressive action, among those who have pushed the administration to crack down, black Americans represent a disproportionate share of student debt. Blacks make up 16 percent of the US population, but owe 23 percent of the country’s student debt.

The US could have forgiven thousands of student loans but didn’t tell borrowers

Representative Alexandria Ocasio-Cortez (DN.Y.), who has been lobbying the White House to cancel student debt, said the administration should cancel up to $50,000 for each borrower, and expressed concern that $10,000 would not be a meaningful improvement for to many. Persons. For Americans with debts of $30,000 or more, she said, canceling $10,000 of that total would not significantly affect monthly payment obligations, a hardship exacerbated by lower inflation-adjusted wages for millions of workers.

While student debtors, like college graduates in general, have a higher average income than Americans in general, those who owe student loans are much less affluent than most college graduates. More than half of student debt is borne by people without wealth, according to the People’s Policy Project. The richest 20 percent of the population has only a small portion of student debt.

“I don’t believe in the cut, especially for the many frontline workers who are drowning in debt and are likely to be excluded from forgiveness,” Ocasio-Cortez said. She added that the national income threshold did not take into account the high cost of living in some parts of the country. “The $50,000 debt cancellation is where the real reduction in inequality and the racial wealth gap is happening. $10,000 isn’t.”

Economist Larry Summers, who served under Presidents Bill Clinton and Barack Obama, said he favored Biden’s approval of policies targeting the half of the population who never went to college, and who have less money than those who go to college. He also said there were “concerns” that canceling student debt would increase inflation, depending on the total amount of loans forgiven.

However, Summers stressed that the administration’s current policy – moratorium on loan payments – is more poorly directed than one that would reduce debt for a certain segment of the population.

“I would prefer to prioritize the people who did not go to university than the people who did,” Summers said. “But it is better to do a specific, targeted program than to provide comprehensive relief.”

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