US President Joe Biden announced on Wednesday, 24 August, that he would cancel $10,000 in student loan debt for American borrowers who are earning less than $125,000 per year, finally fulfilling his campaign promise of providing economic relief on a large scale.
The Biden administration has also extended a pandemic-era pause, that has been in effect since March 2020, on loan payments until the end of 2022.
"In keeping with my campaign promise, my Administration is announcing a plan to give working and middle class families breathing room as they prepare to resume federal student loan payments in January 2023."US President Joe Biden
According to Biden's announcement, those with undergraduate loans would be able to cap their payments at five percent of their monthly income. This would help millions of borrowers significantly reduce their bills. At present, the income-driven plans cap payments at about ten percent of a borrower's discretionary income.
This comes after months of discussions within the White House over the best way to implement the debt forgiveness, given that inflation could cost a lot before the midterm elections.
However, Biden's plan will face legal challenges, thus making any kind of relief for those in debt uncertain.
About 45 million people in the United States owe $1.6 trillion in federal loans taken out for college education, which amounts to a higher amount than they owe on car loans, credit cards, or any consumer debt other than mortgages.
(With inputs from The New York Times.)
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