Advocates expressed anger and disappointment on Friday in response to news that the Biden administration is leaning toward forgiving $10,000 in student loans.
Some Democrats and activists have insisted that President Joe Biden needs to cancel at least $50,000 per borrower to make a meaningful impact on the country’s $1.7 trillion outstanding student loan balance. More than 40 million Americans are in debt for their education, and about 25% of those borrowers are in delinquency or default.
“It’s an absolute insult,” said Thomas Gokey, co-founder of the Debt Collective, a national union of debtors. “This is less than what he promised on the campaign.”
While running for president, Biden had vowed immediate debt cancellation of $10,000 per borrower, and he hadn’t said anything about limiting the relief to people who earn under a certain amount. Now the administration is looking at imposing income caps for the relief of $150,000 for individuals and $300,000 for married couples, according to The Washington Post.
More from Personal Finance:
Free college is now a reality in nearly 30 states
3 ways to avoid taking on too much student loan debt
Is college really worth it?
Adding red tape to the cancellation program will result in many people missing out on the policy, Gokey said, pointing to other government forgiveness efforts that have been plagued by problems. These include the public service loan forgiveness program and income driven repayment plans, which have so far largely failed to deliver their promised relief.
“Everyone will have to jump through hoops,” Gokey said.
The Washington Post on Friday matched prior reporting that the $10,000 cancellation plan is the Biden administration’s leading one to forgive student debt in the final days of May. The newspaper, citing three people familiar with the discussions, said the president had hoped to make the announcement as soon as this weekend but that the mass shooting at an elementary school in Uvalde, Texas, forced the White House to change the timing.
It’s unclear whether the administration will require regular payments to restart at the end of August, when the current pause is set to end.
The White House denied to CNBC that it has any set plans to forgive student debt, and said it has not made a final decision.
“No decisions have been made yet — but as a reminder no one has been required to pay a single dime of student loans since the President took office,” a White House spokesman told CNBC.
Canceling $10,000 per borrower would cost around $321 billion and completely forgive the loans of about one-third of student loan borrowers.
It’s not clear how the relief would narrow with the income caps, although one analysis found around 97% of all student debt was held by those making below the proposed thresholds.
Still, the average student debt balance is over $30,000, and more than 3 million borrowers owe more than $100,000.
NAACP President Derrick Johnson said $10,000 “won’t do anything” for the Black community.
“The average Black borrower has $53,000 in student loan debt four years after graduation, nearly twice the amount as their white counterparts,” Johnson said, in a statement.
“Ten thousand dollars in cancellation would be a slap in the face,” he said. “President Biden, it’s not about whether you can do it; it’s about whether or not you have the will to do it.”
— Additional reporting by CNBC’s Thomas Franck.