Biden to Cancel $10,000 in Student Loan Debt for Borrowers Earning Less Than $125,000

The debt forgiveness comes after months of deliberations in the White House over fairness and fears that the plan could exacerbate inflation before the midterms.

President Biden announced on Wednesday that he would cancel $10,000 in student loan debt for Americans earning less than $125,000 per year, capping months of anticipation over a campaign promise to provide economic relief to millions of people.

Mr. Biden also extended a pandemic-era pause on loan payments until the end of the year. It has been in effect since March 2020.

Mr. Biden also said those with undergraduate loans would be able to cap their payments at 5 percent of their monthly income, a change that could significantly reduce bills for millions of borrowers. The government’s current income-driven plans generally cap payments at 10 percent of a borrower’s discretionary income.

Across the United States, 45 million people owe $1.6 trillion for federal loans taken out for college — more than they owe on car loans, credit cards or any consumer debt other than mortgages.

Many Democrats have argued that debt forgiveness is necessary to address racial disparities in the economy. But critics say widespread debt forgiveness is unfair to those who tightened their belts to pay for college, and Republicans and some Democrats contend that it will add to inflation by giving consumers more money to spend.

On its face, the move could cost taxpayers about $300 billion or more in money they effectively lent out that will never be repaid.

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