Biden plans Wednesday student loan announcement

Biden plans Wednesday student loan announcement

White House officials are planning for President Biden to make an announcement on Wednesday about his proposal to address student loan debt, according to people familiar with the matter.

The president and his aides have been pondering whether to cancel some federal student loan debt for months. Biden’s top advisers discussed several proposals, including eliminating $10,000 in federal student loan debt for borrowers earning less than $125,000 a year, the people said. The president’s advisers also discussed extending a pandemic pause in federal student loan payments.

The White House kept the details of the decision closely guarded. Only a small group of Biden’s top aides have been informed of his plans, some people said.

Biden is due to return to the White House on Wednesday from Delaware, where he is on vacation with his family. The president said he would announce a decision on student loans by August 31.

The White House declined to comment on the specific timing of the announcement or provide further details. A spokesperson reiterated that the president will make his decision before the end of the month.

A move to forgive $10,000 in student debt under certain income thresholds would fall short of progressive Democratic demands for a total cancellation of student debt or a cancellation of $50,000 per borrower, but could apply to most of the 40 million people who hold a total of $1.6. trillions in student loan debt.

Republicans have opposed widespread student debt forgiveness, saying such a move would be unfair to those who have already paid off their loans or never gone to college, and could worsen inflation.

A report released Tuesday from Penn Wharton’s Budget Model estimated that a maximum one-time debt forgiveness of $10,000 per borrower with an income of less than $125,000 a year would cost about $300 billion.

Last month, more than 100 Democratic senators and House members from across the party’s ideological spectrum urged Biden to extend the loan repayment pause beyond its August 31 due date, citing ongoing economic hardship. Biden cited similar reasoning for extending the break earlier, most recently in April.

The Biden administration is closing in on a decision on student loan forgiveness, an issue that could affect millions of Americans and spill over into the upcoming midterm elections. Here are some of the main challenges that complicate the final decision. Illustration: Ryan Trefes

“Resuming student loan payments would force millions of borrowers to choose between paying off their federal student loans or putting a roof over their heads, food on the table, or paying for child care and health care,” the Democratic members wrote.

Republicans have objected to continuing the break, arguing that it constitutes “de facto loan forgiveness.” Senior House Republicans released a bill this month that would end the pause, as well as review other aspects of the federal student loan portfolio. The bill is not expected to go anywhere as long as Democrats control Congress and the White House.

The White House has left borrowers, loan service providers and the Department of Education itself in limbo as Biden pondered whether to extend the break. Last month, the government told loan officers to refrain from sending collection notices or other communications related to resumption of payments.

Loan agents are hired by the federal government to manage student loan payments. They communicate with borrowers about how much they owe, where and how to send payments, and answer questions borrowers have about payment programs. They typically send collection notices at least 30 days before payments start so borrowers can plan ahead.

On Monday, a group of loan officers urged the government to make a decision and said any move so close to the deadline increases the chances of “incidents of borrower miscommunication,” according to a letter seen by The Wall. Street Journal.

“You should be aware that any announcement on this late date, less than ten days before the scheduled September 1 resumption, risks operational disruption,” wrote Scott Buchanan, head of the Student Loan Servicing Alliance, an industry group.

write to Andrew Restuccia at andrew.restuccia@wsj.com, Gabriel T. Rubin at gabriel.rubin@wsj.com and Tarini Parti at Tarini.Parti@wsj.com

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