Joe Biden Forgives $1.2 Billion In Student Loans For 153,000 Borrowers, Offering Federal Debt Relief

Eligible borrowers under the SAVE Plan were slated to receive notification emails on February 21st, detailing the cancellation of their debt.

Genia Chadha

Feb 23, 2024 - 04:39

Joe Biden Forgives $1.2 Billion In Student Loans For 153,000 Borrowers, Offering Federal Debt Relief

Source : Social Media

President Joe Biden is making strides in alleviating the burden of student loans, with an announcement on Wednesday, February 21st, revealing plans to wipe out debt for over 150,000 borrowers. This move signifies a significant step forward in Biden's commitment to tackle the student loan crisis. The administration's latest action comes after a setback last summer when a more ambitious plan to forgive up to $20,000 in debt per borrower was rejected by the Supreme Court.

Since taking office, President Biden has canceled approximately $138 billion in student loan debt, benefiting 3.9 million borrowers. The recent round of relief targets specific borrowers enrolled in the Saving on a Valuable Education (SAVE) Plan, a novel income-driven repayment (IDR) program. SAVE aims to ease the financial strain on low-income borrowers by eliminating monthly payments and reducing annual payments for others by at least $1,000, all while preventing balances from snowballing due to unpaid interest.

Eligible borrowers under the SAVE Plan were slated to receive emails on February 21st informing them of the debt cancellation. The administration's email reportedly underscored its pledge to overhaul student loan programs, ensuring that higher education serves as a pathway to the middle class rather than a barrier to opportunity.

Despite the relief it offers, the concept of loan forgiveness faces criticism. Critics argue that such policies unfairly disadvantage borrowers who have already repaid their loans and saddle taxpayers with the cost. A February 2023 report from the U.S. House Committee on Education & the Workforce raised concerns that Biden's original $400 billion forgiveness plan could shift the burden of loan debt onto taxpayers, costing each taxpayer around $2,500, irrespective of their college attendance.

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While the exact cost of the SAVE Plan to individual taxpayers remains uncertain, an analysis by the Penn Wharton Budget Model (PWBM) suggests it could incur a net cost of $475 billion over a 10-year budget window. The PWBM estimates that around $200 billion of this cost will stem from payment reductions for the $1.64 trillion in outstanding loans as of 2023. Additionally, it forecasts that roughly 53% of the current loan volume will transition to SAVE after its implementation, resulting in approximately $869 billion subject to enhanced subsidies.

The SAVE Plan represents a significant initiative in addressing the student debt crisis, albeit amid debates over its economic implications and distribution of costs.