White House Nears Decision On $10K Student Loan Forgiveness

The White House is nearing a decision over whether it should cancel up to $10,000 in student debt for millions of American borrowers. And despite “close allies feuding” over the decision according to the Washington Post, the Biden administration penciled in a Wednesday ‘student loan debt relief’ announcement.

In recent days, White House officials revived (pre-midterm) discussions over the issue – with an August 31 deadline fast approaching, when payments are set to resume following a pandemic-driven pause.

According to the report, internal White House discussions have revolved around a temporary extension in the payment pause until December, alongside the $10,000 per borrower forgiveness.

That said, forgiving the debt will cost between $300 billion and $980 billion over 10 years – and the majority of relief will go to borrowers in the top 60% of earners, according to a Bloomberg, citing a new analysis by Penn Wharton, whose budget model was released Tuesday ahead of President Biden’s long-anticipated decision.

The Penn Wharton budget group, based out of the University of Pennsylvania and run by a top former Treasury official under Republican President George W. Bush, is influential with key Capitol Hill lawmakers, including Democratic Senator Joe Manchin.

The group estimated that between 69% and 73% of any debt forgiven would accrue to households that rank in the top 60% of the US’s income distribution.

Biden allies and debt-relief advocates expect the administration to extend its current pause on student loan repayment through the end of the year, while also announcing plans to forgive as much as $10,000 in student debt for borrowers whose income falls below $125,000 a year. -Bloomberg

In recent weeks, Biden administration officials have been discussing forgiving a higher amount of debt for low-income borrowers who received Pell grants. Previous discussions included forgiveness for Americans who made less than $150,000 in the previous year, or $300,000 for married couples filing jointly.

The issue has sharply divided Democratic lawmakers and policy experts who are influential in the administration – with advocates saying Biden should fulfill a campaign promise, and critics who are concerned that it will exacerbate inflation while mostly benefiting high-income college graduates who don’t need the help.

During his 2020 Presidential run, Biden urged Congress to forgive $10,000 in student loan debt – while far-left lawmakers such as Elizabeth Warren, and advocacy groups such as the NAACP, have pressured Biden to push for at least $50,000 in forgiveness.

The topic has become a tricky one for the White House, which is trying to appeal to young voters, while also trying to hold themselves out as fiscally responsible.

Administration officials must choose between canceling substantial debt — potentially giving Republicans a new talking point ahead of the midterm elections — and infuriating young voters and racial justice organizations whose support they also need at the polls.

Officials have studied for months whether canceling student loans could alienate voters who had already paid theirs off, and polling results have been mixed, said a third person familiar with the matter, who also spoke on the condition of anonymity to reflect private conversations. -WaPo

“It’s a deep political problem,” said Bill Galston, a former top aide in the Clinton White House. “The fact they have hesitated for so long to put their chips down on the table suggests they’re fully aware of the potential economic and political implications of taking a major step in this direction.“