President Joe Biden reportedly plans to announce a long-awaited plan to forgive up to $10,000 in student loans and extend the COVID-19 pause in repayments one more time.
After months of wrangling, Biden is expected to announce the measures Wednesday, although some details were still being ironed out, multiple news organizations reported Tuesday.
The forgiveness plan is expected to benefit most borrowers making less than $125,000 a year. It is designed to help young borrowers and give Biden’s Democratic allies a crucial boost ahead of the fall midterm elections.
The repayment freeze is expected to be extended until the end of the year.
With more than 40 million Americans carrying a combined debt burden totaling more than $1.6 trillion, student loans are a hot-button issue.
The moves come as Biden celebrates the passage of the Inflation Reduction Act, which spends billions on climate change and allows the government-run Medicare program to negotiate lower prices for some prescription drugs.
Biden hopes to balance the demands of progressives and racial justice advocates for total or much more extensive student loan forgiveness against concerns of moderates about the economic implications.
Many Democrats including Majority Leader Sen. Chuck Schumer, D-N.Y., argue for writing off much more student debt, arguing that the $1.7 trillion in U.S. student loan debt held by about 45 million Americans is a huge drag on the economy.
They pushed for as much as $50,000 per borrower to be slashed.
But moderates say the move will pump more cash into the economy even as the Federal Reserve is trying to tame inflation.
Some Democrats also worry that the plan could anger some who faithfully repaid their outstanding loans, only to see others get a free ride.
A previous plan for Biden to announce significant student loan forgiveness in the spring was scrapped to avoid spooking moderates like Sen. Joe Manchin, D-W.Va., who at the time was still on the fence about the White House’s big economic package.
Republicans and fiscal hawks say the repayment freeze is no longer needed, especially with unemployment at record lows. They deride loan forgiveness as an election season giveaway to Democratic-leaning constituencies.
Last month officials at the Education Department finalized a plan for mass debt cancellation, which they are ready to implement at the president’s orders. Under the plan, all federal student loan types would be eligible for debt relief, including Grad, Parent PLUS, as well as federal loans owned by private firms.
Most student loan holders have not been required to make payments on their debts since the COVID-19 pandemic struck in March 2020.