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Biden's long-awaited student loan debt plan is better than it first sounds

Millions of Americans will see their federal student loan balances wiped out or substantially reduced.

After months of winks and nods and behind-the-scenes negotiations, the Biden administration has finally released its student loan debt relief plan. And while it’s not nearly as robust a plan as I would have liked to see, I can’t deny that it will help millions of Americans who have been shackled to a debt that’s unfairly weighed them down.

President Joe Biden announced the decision on Twitter Wednesday morning, describing the relief as providing “breathing room” for borrowers “as they prepare to resume federal student loan payments in January 2023.” Americans earning less than $125,000 per year will see their federal student loan balance reduced by at least $10,000. That cap raises to $250,000 per year for people filing jointly. Another $10,000 will be slashed from the accounts of people who received federal Pell Grants for their undergraduate studies.

According to data, as of the second quarter of 2022, about 45.3 million Americans held federal student loan debt. This action would clear the remaining debt of up to 23.9 million Americans who hold $20,000 or less in debt, depending on if they had Pell Grants in undergrad. That means that up to half of federal debt holders may see their loans wiped out entirely, depending on their eligibility. Another 9.7 million Americans holding between $20 – 40,000 in debt may see their balances cut substantially.

That direct relief will be coupled with a final extension of the student loan repayment pause, scheduled now to end on Dec. 31, 2022, and a permanent option to cap student loan repayments at 5% of monthly income.

Up to half of federal debt holders may see their loans wiped out entirely, depending on their eligibility.

I’m on the record as being opposed to means-testing federal programs, but I will say that, aside from the income ceiling, the administration is targeting the right people here. Studies have shown that most of the people who default on their student loan debts or struggle to repay them owe less than $10,000. Millions of Americans are carrying student loan debt for programs that they began and never finished, many of whom will see most, or all, of their debt wiped out. And Pell Grant recipients are those whose families struggle the most to afford college.

The current structure leaves out a substantial number of people though who would have benefitted if there were a broader pool of recipients or a larger amount of relief. For people with postgraduate degrees, whose loans will qualify for relief under this policy, $20,000 in relief may be a drop in the bucket relative to their total debt. That is especially true for women and people of color who have gone for graduate degrees, often just to boost their résumés to make the same amount as their white, male peers.

From a political standpoint, I can see why the Biden administration would want to have a cap on who receives this relief. But it won’t stop the attacks from conservatives. Mississippi Gov. Tate Reeves tweeted on Wednesday that Biden’s plan will mean that “welders, plumbers, laborers, & other Mississippians (black, white, Hispanic, etc.) will be forced to pay off the debts of Harvard doctorate degree gender studies majors living in California.”

It’s a play at class division that might gain traction, even if built on lies like the one Reeves is pushing. That argument says nothing about, say, a plumber or welder who took out $10,000 in loans to attend community college but opted to go into a trade instead and is still working to pay off that debt, or those who took out federal student loans specifically to attend an eligible trade or career school. This relief will help them just as much as it will liberal arts majors.

The Education Department needs to email every federal student loan debt holder who qualifies to show them the reduction in their total bill and how much faster they’ll be able to pay off the total.

The next step the Education Department needs to take is email every federal student loan debt holder who qualifies to show them the reduction in their total bill and how much faster they’ll be able to pay off the total. It may be harder to sell a future benefit than one taking effect today, but officials need to start trying as soon as possible.

That job will be made easier by the income cap on monthly student loan repayments, a part of the program that may be easily overlooked. The average monthly payment for a bachelor’s degree holder is around $450, according to If you’re a Kansas resident making about $45,000 a year, that’s about 16% of your monthly take home pay. Capping your repayment at 5% would bring that down to $150 per month, or leaving $300 more in your bank account each month, which is nothing to sneeze at.

All told, given how likely it seemed that we’d see no action at all before the midterms, or during the Biden administration at all, I’m pleased with this course of action. It lays the groundwork for even more substantial relief in the future and will take a load off the shoulders of some of the people who’ve been ground down the furthest under their student loans. And it means that millions of Americans won’t have to start repaying their loans until after the midterms. I’m going to mark this down as a solid B+ on the White House’s report card.