The White House Might Eliminate $10k of Student Debt per Borrower

The Washington Post has reported that sources in the Biden administration say that the president originally planned to announce it today, Saturday May 28th, but that it was pushed back after the shooting in Uvalde this past week.

This is reported to be $10k of debt for students who made less than $150,000 in the previous year or $300,000 for couples who filed taxes jointly. Means testing is often weaponized against social programs, sometimes ensuring that they are confusing and hard to access, like the issues still coming out around the COVID PPP loans, but this situation might be an easier method, since, at least ideally, it will simply affect the accounts for all qualifying individuals. The biggest question remaining is whether there will be sufficient communication to the loan recipients, since the servicer transition gives us hope that it won’t be quite so opaque.

The Biden administration has been pretty consistent on wanting to forgive a specific amount of student loans and not the whole amount, wishing not to take on the long tail of student debt. Possibly this is driven by a view that people with a larger debt are more likely to have degrees which will eventually put them above that $150k figure (although this data seems to imply that a lot of the highest holders of debt are in lower earning majors), and it is very likely that simply turning back on payments without some kind of relief would cause a lot of stress for borrowers and might even precipitate a crisis like the bottom falling out of the real estate market in 2007. 

But there is likely a political calculation here; trying help as many voters as possible with the lowest price tag. The administration has been struggling to pass almost any legislation with a theoretical democratic majority in the senate and the first midterm election tends to go to the non-presidential party, meaning that Biden might be able to do even less in the second half of his term, unless he can convince a large number of people to back the Democrats in November.

Even if there is a baser motivation, I am hopeful that it would be able to give some relief to the people who have been really struggling under the weight of the debt. Planet Money did a great episode on the effect that the payment pause has had on some individuals, and what it might mean for them if they were expected to start paying the full amount again.