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President Biden announced Wednesday that he will cancel $10,000 of federal student loan debt for certain borrowers making less than $125,000 per year, and up to $20,000 for Pell Grant recipients, while extending the pause on federal student loan payments through the end of the year.
“In keeping with my campaign promise, my Administration is announcing a plan to give working and middle class families breathing room as they prepare to resume federal student loan payments in January 2023,” Biden tweeted.
Biden is expected to give remarks on the plan Wednesday afternoon.
The nation’s federal student debt now tops $1.6 trillion after ballooning for years. More than 43 million Americans have federal student debt, with almost a third owing less than $10,000 and more than half owing less than $20,000, according to the latest federal data.
The national debt, according to the Treasury Department, currently sits at $30.7 trillion.
Biden said his administration will forgive student loan debt up to $20,000 for borrowers who attended college on Pell Grants; and $10,000 for borrowers who did not receive Pell Grants. Biden said the forgiveness “only applies to those earning less than $125,000.”
Biden also said that borrowers with undergraduate student loans are able to “cap repayment at 5% of your monthly income.”
Pandemic-era payment freezes were set to end on Aug. 31, but Biden on Wednesday also extended the payment pause “one final time through Dec. 31, 2022.”
According to a Penn Wharton Budget Model, a one-time maximum debt forgiveness of $10,000 for borrowers who make less than $125,000 will cost around $300 billion for taxpayers.
This is a developing story. Check back for updates.