On Wednesday, President Joe Biden announced that the US government will forgive $10,000 in student loans for millions of Americans who earn less than $125,000 a year, keeping the pledge he made in his 2020 campaign for the White House. Students on Pell Grants, which applies to those in the greatest financial need, will be forgiven for $20,000 of debt.

“People can finally crawl out under that mountain of debt,” said Biden. It is estimated that 43 million Americans owe a combined total of $1.6 trillion in student debt - approximately a fifth owe less than $10,000. The BBC also reported that about a third of borrowers have student debt, but no degree, “the worst of both worlds,” as Biden said.

In March 2020, a temporary student loan pause was put in place, this will also be extended for the last time until 31 December this year. According to an estimate from the Penn Wharton budget model at the University of Pennsylvania, the one-time cancellation of $10,000 for each qualifying borrower will cost the federal government about $300 billion.

Biden’s plan falls short of the $50,000 per borrower that Democrats such as Senator Elizabeth Warren and Senate Majority Leader Chuck Schumer had asked for. However, Republicans and moderate Democrats are concerned that will move will add to inflation, as it gives Americans more money to spend. Other say that the debt forgiveness is unfair to those who have already paid their student loans.

What do you think of this decision?

Image from Sky News