Reporting suggests that the Biden administration has reportedly settled on a plan to cancel $10,000 of federally-held student debt for every debt holder in the United States — under a certain income. But is it enough?
On May 27, 2022, The Washington Post reported that Biden’s latest plan to tackle student debt includes $10,000 in relief for federal borrowers who made less than $150,000 the year prior for single filers, or less than $300,000 for married couples who file jointly. This number is higher than the previous reports that indicated an income cap may be added to the debt forgiveness plans.
However, using means-testing for debt relief can be complicated administratively, and income doesn’t necessarily give a real picture of someone’s ability to pay off loans.
Analysis from the Brookings Institute points to the fact that while earners with student loans do tend to have higher incomes than those who didn’t attend school, that income, paired with student debt, looks very different when broken into hourly wages. Student debt repayment eats away at the wages, and ability to build wealth, of people who had to take loans to attend school — which “disproportionately harms the wealth-poor,” in particular, Black Americans.
Adding income caps give the potential of having a very large administrative and bureaucratic hassle. “New college graduates generally don’t make that kind of money, and nor do the 40 percent of student debt holders who dropped out of college,” The American Prospect points out in an argument against means-testing debt relief. “But all of them will have to navigate the often punishing bureaucracy of confirming their earnings level. It means a massive headache for millions to cut out a minuscule proportion of borrowers.” (Estimates suggest that 97 percent of single-filer borrowers earn less than $150,000, meaning the means-test would only cut out 3 percent of people paying down student debt.)
Regardless, our massive student debt is a crisis that needs to be resolved. Statistics reveal that 45 million Americans hold student debt, and the average debt held per borrower is a whopping $28,950 — which totals $1.75 trillion in student loan debt across the country, for both private and federal loans. And over a million loan holders are defaulting on those loans every year.
The loans combined with interest rates that leave borrowers paying for decades, rising inflation, and stalled wages, can trap people in a lifetime of payments. And while it’s known that canceling $10,000 of debt for all borrowers would wipe out debt completely for a third of all borrowers, and by half for another 20 percent — that’s no small potatoes — what’s not known is if the proposed income limit severely affects the efficacy of the cancelation.
Organizations like the Debt Collective — the nation’s first debtors’ union — are pushing back against the rumors and say that $10,000 is not going to be enough, and it would take a substantial amount to bring back that equality. “A lot of pundits expect us to take our $10,000 of student debt cancelation ball and go home,” the organization tweeted. “Nope. We’re fighting for full cancelation. All of the debt is unjust.”