Here’s who benefits most and least

Topline

Of the roughly 45 million Americans with federal student loan debt, here’s who will benefit the most from President Joe Biden’s plan announced Wednesday that provides $10,000 in relief to all borrowers with annual incomes below $125,000 $ and $20,000 in aid to those who qualified for Federal Pell Grants for low-income undergraduate students below the income cap.

Highlights

32% of all borrowers: The initiative could instantly erase all outstanding federal student loans for up to 14.6 million borrowers who held less than $10,000 in debt at the end of June, representing 32% of all borrowers, according to the federal government. Dataprovided that such persons fall below the income ceiling.

A huge advantage for many: The policy will also erase at least half of the student loan debt held by the 20.5% of borrowers who owe between $10,000 and $20,000, and take a significant portion of the $20,000 to $40,000 owed by 21.4% more borrowers.

Just a little help for some: However, the relief doesn’t move the needle much for the most indebted Americans: Some 38% of the $1.62 trillion in total outstanding federal student loan debt is held by borrowers with balances over $100,000. dollars, even though they represent only 7.5% of all borrowers.

Favors high-income Americans: Despite the $125,000 income cap, research shows that the White House plan still slightly favors higher-income Americans: Analysis of a $10,000 comprehensive relief package released by the Penn Wharton Budget Model on Tuesday found that 69.79% of the overall debt cancellation would go to the top 60% of Americans, while people who earn between $82,400 and $141,096, placing them between the 60th and 80th percentile – would receive the largest share of the overall rebate, at 28.1%, although the additional relief for Pell Grant recipients should bring additional benefits to low-income borrowers.

In general, Americans with the highest incomes hold more student debt, with the wealthiest 10% of individuals holding 17.4% of all debt, compared to 13.8% for the poorest 20%. remunerated, according to the latest installment of the Federal Reserve’s survey of consumer finances in 2019.

Key Context

Since Biden took office in January 2021, progressives have pushed him to unilaterally take action on student loan relief, though he has been reluctant to act so far. would have due to concerns about fairness, the legality of such an unprecedented decision and its impact on inflation. About two-thirds of bachelor’s degree holders take out federal student loans, according to the latest data from the Ministry of Education. Students who went to public colleges hold $714.6 billion in outstanding federal debt, or an average of $28,357 per borrower, compared to $561.1 billion in total debt for those who attended private colleges, or an average of $40,956, according to the federal government. Students with more advanced degrees carry more debt on average: A analysis According to Texas Public Policy Foundation Department of Education data found in 2017 and 2018, associate degree graduates borrowed an average of $14,000, compared to $23,000 for borrowers with a bachelor’s degree. , $40,000 for master’s degree holders, $73,000 for doctoral degree holders and $144,000 for borrowers. who were looking for professional degrees in fields such as law and medicine.

Surprising fact

A $10,000 blanket rebate plan would have cost the federal government $311 billion in 2022, according to Penn Wharton’s budget model estimates, but the $125,000 revenue limit would only save the government a relatively small amount. low of $12.6 billion. To research shows the income cap helps make the policy less regressive and more beneficial to poorer Americans.

Large number

More than 60%. It is the proportion of borrowers who have received Pell grants and are eligible for $20,000 in assistance, according to the White House.

Chief Spokesperson

Much of the criticism of Biden’s relief measure has focused on the immense cost of the program and its potential impact on inflation, which hit a 40-year high earlier this year. Some critics like Senate Minority Leader Mitch McConnell (R-Ky.) indicate how it doesn’t help blue-collar workers of different income levels who never went to college. In a statement On Wednesday, McConnell called the initiative “astonishingly unfair and” a slap in the face for every family who has sacrificed to save for college, every graduate who has paid off their debt and every American who has chosen a certain career path or volunteered to serve in our armed forces in order to avoid going into debt.”

Further reading

Biden’s Student Loan Forgiveness Plan: Up to $20,000 in relief, $125,000 income cap — here’s all the other details (Forbes)

Repayment of student loans: budgetary costs and distributive impact (Budget model from Penn Wharton)

Who Are Federal Student Loan Borrowers and Who Benefits from Forgiveness? (Freedom Street Economy)

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