Biden’s new proposal could bring debt relief to 23 million borrowers
The Biden administration has come up with a new plan to bring debt forgiveness to millions of student borrowers despite pushback on previous versions.
The proposal would write off accrued interest for 23 million borrowers, wipe debt balances for over four million borrowers, and deliver at least $5,000 in debt relief to over 10 million borrowers.
According to the plan, eligible borrowers in the low and middle-income brackets, including singles earning up to $120,000 and married couples earning up to twice that amount, could see their entire balances erased.
“Today too many Americans, especially young people, are saddled with unsustainable debts in exchange for a college degree,” Biden said in a speech. “By freeing millions of Americans from this crushing debt [...] It means they can finally get on with their lives instead of their lives being put on hold.”
America’s student debt crisis has spiraled out of control, with 25 million borrowers currently facing a balance that’s higher than their original federal student loans.
Yet, Biden's student debt forgiveness continues to be met with significant opposition, particularly from Republican lawmakers.
Wisconsin’s very own Rep. Derrick Van Orden believes using American taxpayer dollars to pay off student loan debt is unfair.
“Expecting our hardworking blue-collar men and women who decide to go to trade school to pay off the bill of people that have decided to get a four-year degree,” he said.
The average price tag on a trade school education is approximately $17,600 compared with an annual tuition at a four-year university averaging between $10,740 and $27,560.
Rep. Bryan Steil, also from Wisconsin, blames the president for “trying to buy votes.”
Student loan forgiveness fine print
After his $430 billion student debt relief program was rejected by the Supreme Court last year for exceeding his power, President Biden revised his plan.
In this latest proposal, he “narrows” his focus to borrowers of certain groups, such as those suffering financial hardship. Nevertheless, the program seeks to extend relief to tens of millions of borrowers.
The latest program is in addition to President Biden’s SAVE plan, which offers relief through lower payments and quicker loan forgiveness.
If the Supreme Court rejected Biden’s previous student debt relief proposal, what’s to say they won’t do the same with the latest version? According to Rep. Steil, the latest proposal doesn’t stand a chance.
“I think the courts will once again find this action to be unconstitutional, rightfully so,” he said.
If Biden’s proposal does pass, it could help tens of millions of borrowers but would leave other struggling Americans out in the cold. It would also add billions of dollars to the already ballooning national debt, making it a tough sell for those who paid their debts.
One piece of a puzzle
It's not hard to tell Americans are financially stressed, with debt balances and delinquencies on the rise.
And while student debt has crested over $1.7 trillion last year, it's just one piece of consumer debt that also includes credit cards, mortgages, and auto loans.
Credit card borrowers have also joined the trillion-dollar club, with card balances rising by $50 billion in Q4 2023 to $1.13 trillion.
Worse, more borrowers have become delinquent on their credit card balances, with overdue accounts climbing 50% higher last year.
Additionally, American homeowners owe $12.25 trillion in mortgage debt, buoyed by $112 billion in the fourth quarter. Not to be outdone, auto loan balances have been rising for over a decade, soaring by $12 billion in Q4, reaching $1.61 trillion.
These borrowers are arguably in just as much financial trouble as student loan borrowers, if not more. Yet, there are no relief programs to help pay down credit card bills, auto loans, or mortgages.