What will happen to student debt in the US? Biden could extend the moratorium or cancel part of it

Biden would cancel federal student loans, see how 2:56 (CNN Spanish) — The government of President Joe Biden could cancel US $ 10,000 of student debt per applicant, a controversial measure for many due to its impact on the country’s economy but that it would provide a reprieve for the 43 million indebted youth who have been saddled with sky-high student loan amounts since they graduated from college. In March 2020, due to the covid-19 pandemic, Biden paused the monthly payments on these student loans, and since then the pause has been extended four times. But this August 31, the payments could be reactivated and young Americans are waiting to find out what the next step the president will take in this regard: extend the moratorium for a few more months or, perhaps, forgive part of the debt. And while it’s not yet clear what the final decision will be, a source told CNN that the White House has outlined a plan to forgive $10,000 of student debt. If this happens, it would add to the $32,000 in loans the Biden administration has already largely written off for thousands of applicants who were scammed by private colleges. Who, then, could be the beneficiaries of this measure? And what implications might it have for the US economy? What has happened to student loans in the US under the Biden administration? With the arrival of Biden to the White House, the student loans of some 1,600 million American graduates were forgiven, mostly to those who had been defrauded by private university centers. But what exactly happened to these types of universities? The now-defunct ITT Technical Institute, for example, closed shortly after the government cut off its federal funding because it failed to demonstrate that it met certain accreditation standards. Evidence from state and federal investigations showed malpractices such as high loan defaults, dubious programs, misleading advertising, lying to the government about graduation rates, and more. “Evidence shows that for years, ITT leaders intentionally misled students about the quality of their programs in order to take advantage of federal student loan programs, without considering the hardship this would cause,” he said at the time. Miguel Cardona, Secretary of Education of the United States Given the situation, the Department of Education canceled US$ 3,900 million of the debt in student loans of 208,000 students who attended the ITT Technical Institute. Now Biden has canceled more student loan debt than any other president in US history, and Wednesday’s announcement could extend aid to hundreds of thousands of alumni who hadn’t applied. Biden also froze monthly student loan payments since March 2020, when the Covid-19 pandemic paralyzed economic activity around the world. For more than two years, interest has stopped accruing and monthly debt collections have been suspended. Who could have student debt cancelled? This is how you could pay off your student debt in the US 3:06 CNN has learned that White House officials have been weighing and leaning toward writing off up to $10,000 in student loan debt per applicant. The plan, according to multiple sources familiar with the discussions, is designed to offer forgiveness to those who earn less than $125,000 a year. In addition, White House officials have also discussed the possibility of forgiving student debt for another specific part of the graduating population, according to sources familiar with the discussions. One of the ideas discussed points to supplemental debt cancellation for Pell Grant recipients. However, the fact that the idea has been discussed does not mean that the White House has finally decided to go down this path, and it is not clear that a final decision has been made on the details of President Biden’s next announcement. Pell Grants are offered to students who demonstrate “exceptional financial need,” according to the Department of Education. Former students at private universities like ITT Tech with federal student loans are also eligible for discharge even if they have not previously applied for relief under the Department of Education’s Borrower Defense Program for Repayment, which offers discharge to those who can show that they have been defrauded or cheated by their universities. Whatever Biden decides, you should know that the government already has a number of programs that offer student debt forgiveness for certain groups of applicants, usually after they make a specified number of payments: Public Service Loan Forgiveness Teacher Loan Forgiveness Program Borrower Defense Against Repayment Income-Based Repayment Program Total and Permanent Disability Discharge What would it mean for the American economy to pay off some student debt? What are the challenges of forgiving student debt? 2:56 More progressive activists and lawmakers, including Senate Majority Leader Chuck Schumer and Massachusetts Sen. Elizabeth Warren, have called on Biden to pay $50,000 per applicant. But Biden has consistently refused to cancel that amount even though he is open to a lower figure, in line with what he promised in the campaign before arriving at the White House. On the other hand, there are those who criticize Biden for taking these types of measures when the country barely seems to recover from the economic effects left by the pandemic and Russia’s war in Ukraine. Marc Goldwein, senior vice president and senior policy director for the Committee for a Responsible Federal Budget, a nonpartisan group that tracks federal spending, opposed the plan in an interview with CNN’s Poppy Harlow on “Newsroom.” Goldwein believes that writing off $10,000 of debt per applicant is likely to increase inflation, undermine the stated goal of the Democrats’ Inflation Reduction Act, and will not significantly narrow the racial wealth gap. “The Inflation Reduction Act saves perhaps US$300 million in the first 10 years. If we write off $10,000 of debt and just extend the pause a few months, we’ll be at that amount in terms of new costs,” he said. “All deficit reduction will be eliminated. At the same time, we will probably do more to increase inflation through debt cancellation than any reduction in inflation from the Inflation Reduction Act.” CNN’s MJ Lee, Phil Mattingly, Sam Fossum, Maegan Vazquez, Katie Lobosco and Paul LeBlanc contributed to this report.