Finance & Economics

Joe Biden Erases $127 Billion in Student Debt

The United States government has erased student loans worth more than $127 billion since 2021.

Joe Biden Erases $127 Billion in Student Debt

The media notes that the leadership of this country committed the aforementioned actions as a result of making changes to the relevant state programs. At the same time, the government in this case ignored the ruling of the US Supreme Court, which blocked Joe Biden’s initiative to forgiveness student loans.

Many of the borrowers applied for forgiveness only to be refused. According to media reports, since the beginning of Joe Biden’s work as president of the United States, student loan debt has been repaid by more than 3.6 million people.

Justin La Mort, a public interest lawyer from New York, told reporters that he was forgiven about $150,000 of law school debt after 10 years of payments under the loan forgiveness program voluntarily. He had to wait for the consolidation of his loans and apply several times. At the same time, the lawyer noted that now he has the opportunity to start saving money, including to pay for his children’s education. Justin La Mort intends to continue his public activities. For him, after about $150,000 was forgiven, the question of eligible for his work to the mentioned program is no longer relevant.

The media note that in the United States for a long period, there was a high level of refusals to write off student debts. At some point, the corresponding indicator reached 99%. This problem was particularly relevant for borrowers applying for PSLF and IDRs.

The Joe Biden administration has forgiven about $93 billion under PSLF and IDR plans, $11.7 billion on loans for people with full and permanent disability, and $22.5 billion to borrowers whose educational institutions were closed or involved in fraud.

Scott Buchanan, executive director of the Student Loan Servicing Alliance, a federal student loan servicing trade group, said this environment is challenging. According to him, sometimes the call-hold time differs significantly from the desired indicators.

In August, Joe Biden’s administration unveiled the Saving on a Valuable Education (SAVE) plan, which proposed an income-based loan repayment model. In this case, monthly payments are calculated taking into account the borrower’s income and family size. The factor of the loan balance is not taken into account in the framework of the mentioned plan. Also, the initiative of the American president provides for the cancellation of the loan after a certain number of years and reduces student loan payments by half, which helps to reduce the burden from 10% to 5% of discretionary income.

At the same time, the media note that the forgiven loan balances are a small part of the outstanding federal student debt, which amounts to $1.8 billion. In October, most borrowers received not a notice of forgiveness, but rather a bill for the first time in almost four years after the end of the pause in payments caused by the coronavirus pandemic.

The resumption of debt payments during a period of rising cost of living has become a factor of significant economic pressure on many Americans. Borrowers interviewed by the media say that they will have to reduce savings and expenses or get a second job to be able to make loan payments.

As we have reported earlier, American Banks Lose Nearly $19 Billion in Loans.

Serhii Mikhailov

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Serhii’s track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.