Biden’s $20,000 Student Debt Forgiveness Order Will Trigger More Inflation Next Year – Mish Talk

Debt Forgiveness Details

Today, the White House announced details of Biden’s Student Loan Forgiveness Plan.

• The Department of Education will provide up to $20,000 in debt cancellation to Pell Grant recipients with loans held by the Department of Education, and up to $10,000 in debt cancellation to non-Pell Grant recipients. Borrowers are eligible for this relief if their individual income is less than $125,000 ($250,000 for married couples). 
• To ensure a smooth transition to repayment and prevent unnecessary defaults, the pause on federal student loan repayment will be extended one final time through December 31, 2022.
• Fixing the broken Public Service Loan Forgiveness (PSLF) program by proposing a rule that borrowers who have worked at a nonprofit, in the military, or in federal, state, tribal, or local government, receive appropriate credit toward loan forgiveness. 
• Caps monthly payments for undergraduate loans at 5% of a borrower’s discretionary income—half of the rate that borrowers must pay now under most existing plans. This means that the average annual student loan payment will be lowered by more than $1,000 for both current and future borrowers. 
• To further reduce the cost of college, the President will continue to fight to double the maximum Pell Grant and make community college free.
• The Department of Education estimates that roughly 27 million [Pell Grant] borrowers will be eligible to receive up to $20,000 in relief.
• Provide relief to up to 43 million borrowers, including cancelling the full remaining balance for roughly 20 million borrowers.
• A typical nurse (making $77,000 a year) who is married with two kids would pay only $61 a month on their undergraduate loans, compared to the $295 they pay now under the most recent income-driven repayment plan, for annual savings of more than $2,800.