(CNSNews.com) - President Joe Biden announced on Wednesday that the administration will provide $20,000 in debt relief to borrowers who received Pell Grants while they were in college.
To qualify, a borrower must make less than $125,000, or $250,000 if they are part of a household. Borrowers who are not Pell Grant recipients but who meet those income thresholds will be eligible to receive $10,000 in relief.
"It is really hard to overstate how significant this is for America’s middle class and for our economy," Biden administration officials said in a background call.
"This announcement will help people who, by and large, came from working families and are working-class now, the White House said. (But note the income levels above -- $125,000 or $250,000 – the new “working class”?)
"If all borrowers claim the relief that they’re entitled to, 43 million federal student loan borrowers will benefit. And of those, 20 million will have their debt completely canceled."
The plan is highly progressive, the White House said.
"Among borrowers who are no longer in school, nearly 90 percent of relief dollars will go to those earning less than $75,000 a year, and no one in the top 5 percent of incomes in America will get a single dollar of relief.
"Also, by targeting relief to borrowers with the highest economic need, this plan helps narrow the racial wealth gap. That’s in part because Black students are more likely to have to borrow for school, more likely to take out larger loans, and more likely to have received Pell Grants."
The forgiveness applies to loans taken out through June 30, 2022, not future loans.
'How do we pay for it?'
"We pay for it by what we've done," Biden said.
"Last year, we cut the deficit by more than $350 billion. This year we're on track to cut it by more than $1.7 trillion by the end of this fiscal year, the single largest deficit reduction in a single year in the history of America. And the Inflation Reduction Act's going to cut it by another $300 billion over the next decade because Medicare will be paying less for prescription drugs, and over $1 trillion if you add it out for the next two decades.
"The point is this. There is plenty of deficit reduction to pay for the programs -- cumulative debt reduction to pay for the programs many times over.
“I will never apologize for helping Americans working -- working Americans and middle class, especially not to the same folks who voted for a $2 trillion tax cut that mainly benefited the wealthiest Americans and the biggest corporations that slowed the economy, didn't do a hell of a lot for economic growth, and wasn't paid for and racked up this enormous deficit, just as we've never apologized when the federal government forgave almost every single cent of over $700 billion in loans to hundreds of thousands of small businesses across the -- across America during the pandemic.
"No one complained that those loans caused inflation. A lot of these folks in small businesses are working and middle class families. They needed help. It was the right thing to do. So, the outrage over helping working people with -- with student loans I think is just simply wrong, dead wrong. Third thing, we're fixing the student loan program system itself."
Biden also announced that the extended pause on loan repayments is going to end December 31.
"It's time for the payments to resume," he said.
As for the loan forgiveness, Biden said, "95 percent of the borrowers can benefit from these actions. That's 43 million people.
“Of the 43 million, over 60 percent are Pell Grant recipients. That's 27 million people who will get $20,000 in debt relief. Nearly 45 percent can have their student debt fully canceled. That's 20 million people who can start getting on with their lives.
"All this means people can start -- finally crawl out from under that mountain of debt, to get on top of their rent and their utilities, to finally think about buying a home or starting a family or starting a business.
"And by the way, when this happens, the whole economy is better off. In the coming weeks, the Department of Education will lay out in detail a short and simple form to apply for this relief, along with information when this application process opens.
“By resuming student loan payments at the same time as we provide targeted relief, we're taking an economically responsible course..."