US President Joe Biden is set to announce his long-delayed move to forgive up to $10,000 in federal student loans for many Americans and extend a pause on payments to January, according to three people familiar with the plan.
The people spoke on condition of anonymity to discuss Biden's intended Wednesday announcement ahead of time.
The precise details of Biden's plan, which will include an income cap limiting the forgiveness to only those earning less than $125,000 a year, were being kept to an unusually small circle within the Biden administration and were still not finalised on the eve of the announcement.
Down-to-the-wire decision-making has been a hallmark of the Biden White House but the particular delay on student loans reflects the vexing challenge confronting him in fulfilling a key campaign promise.
The plan would likely eliminate student debt entirely for millions of Americans and wipe away at least half for millions more.
Biden has faced pressure from liberals to provide broader relief to hard-hit borrowers, and from moderates and Republicans questioning the fairness of any widespread forgiveness.
The delay in Biden's decision has only heightened the anticipation for what his own aides acknowledge represents a political no-win situation.
Ballooning federal student debt
The nation’s federal student debt now tops $1.6 trillion after ballooning for years.
More than 43 million Americans have federal student debt, with almost a third owing less than $10,000 and more than half owing less than $20,000, according to the latest federal data.
The continuation of the pandemic-era payment freeze comes just days before millions of Americans were set to find out when their next student loan bills will be due. This is the closest the administration has come to hitting the end of the payment freeze extension, with the current pause set to end on August 31.
Wednesday’s announcement has been set for the White House after Biden returns from vacation in Rehoboth Beach, Delaware.
Biden was initially skeptical of student loan debt cancellation as he faced off against more progressive Democratic Senators Elizabeth Warren and Bernie Sanders who had proposed cancellations of $50,000 or more, during the 2020 primaries.
As he tried to shore up support among younger voters and prepare for a general election battle against then-president Donald Trump, Biden unveiled his initial proposal for debt cancellation of $10,000 per borrower, with no mention of an income cap.
Last minute push for bigger debt relief
But Democrats, from members of congressional leadership to those facing tough re-election bids this November, have pushed the administration to go as broad as possible on debt relief, seeing it in part as a galvanising issue, particularly for Black and young voters this fall.
Although Biden’s plan is narrower than what he initially proposed, Celinda Lake, a Democratic pollster, described student debt as a “gateway issue” for younger voters, meaning it affects their views and decisions on housing affordability and career choices.
However, John Della Volpe, who worked as a consultant on Biden’s campaign, said the decision was more about "trust in politics, in government, in our system ...”
Republicans, meanwhile, see only political upside if Biden pursues a large-scale cancellation of student debt ahead of the November midterms, anticipating backlash for Democrats — particularly in states where there are large numbers of working-class voters without college degrees.
Critics of broad student debt forgiveness also believe it will open the White House to lawsuits, on the grounds that Congress has never given the president the explicit authority to cancel debt on his own.
