Biden is ‘leaning towards wiping $10,000 in student loans from Americans making less than $125,000’

Joe Biden could make an announcement as early as Wednesday on potentially forgiving $10,000 in federal student loan debt for each borrower earning less than $125,000 annually.

The impending potential announcement comes as borrowers’ nail-biting continues with the fast-approaching August 31 loan moratorium deadline.

People familiar with discussions told Bloomberg that some low-income borrowers who received Pell grants could also receive a higher amount of debt forgiveness.

A new analysis released Tuesday from the Penn Wharton Budget Model estimates that forgiving student loan debt for this income demographic could cost between $300 and $980 billion over 10 years.

It also notes that the majority of relief would go towards borrowers who are within the top 60 percent of earners.

Larry Summers, who served as a top economic adviser under Obama, warned the Biden administration against ‘unreasonably generous’ student loan relief and predicted it would further raise inflation .

He also said that the ‘worst idea’ would be to continue the current moratorium on student loan payments, set to expire next week.

While final details of an impending announcement on the future of student loan forgiveness are still being worked out, President Biden’s White House has been signaling for months the potential canceling of a certain amount for each individual borrower.

Outside the baseline forgiveness of $10,000 per borrower meeting a specific income threshold, sources claim the administration is also weighing the possibility of additional forgiveness for specific population subsets.

Education Secretary Miguel Cardona also said on Sunday that word is coming in the next week on the future of the student loan moratorium.

Borrowers are still waiting to hear if President Joe Biden will extend the loan repayment moratorium for a fifth time as the August 31 deadline approaches

It’s expected that the administration will extend the moratorium for a fifth time, after student loans were first put into limbo at the onset of the COVID-19 pandemic in March 2020.

Those who had outstanding federal student loans have not had to make monthly payments for nearly two-and-a-half years and saw their interest accruement also put on hold during the public health emergency, which also saw the onset of mass layoffs and furloughs.

Despite the job market recovering, the U.S. is still experiencing a series of economic crises, including record-high gas prices, inflation and a traditionally defined recession with two consecutive quarters of negative Gross Domestic Product (GDP) growth.

The Penn Wharton budget group, which is based out of the University of Pennsylvania and run by the top Treasury official under George W. Bush, is highly influential with key lawmakers, including moderate Democratic Senator Joe Manchin. 

Their Tuesday analysis estimates that between 69 and 73 percent of student debt forgiveness would actually go towards households in the top 60 percent of U.S. income distribution with the plan to cancel $10,000 in debt for those making less than $125,000.

Progressives, however, think the $10,000 forgiveness plan is weak – demanding that Biden cancel all federal student loan debt despite signals from the administration he is against going that far

Education Secretary Cardona said Sunday that borrowers should hear from the administration in the ‘next week or so’ on if the student loan moratorium is being extended again.

‘We know August 31st is a date that many people are waiting to hear something from,’ Cardona told NBC Meet the Press host Chuck Todd.

‘We’ve been talking daily about this,’ he assured. ‘And I can tell you that American people will hear within the next week or so.’

Todd asked: ‘Is it fair to say it won’t be nothing?’

‘Well, I don’t have any news to announce today,’ the secretary said. ‘But I will tell you the American people will hear directly from us because we recognize this is an important issue across the country.’

Following Cardona’s remarks, Larry Summers tweeted: ‘I hope the Administration does not contribute to inflation macro economically by offering unreasonably generous student loan relief or micro economically by encouraging college tuition increases.’

‘The worst idea would be a continuation of the current moratorium that benefits among others highly paid surgeons, lawyers and investment bankers,’ the Clinton-era Treasury secretary and Obama-era National Economic Council director added.

‘Every dollar spent on student loan relief is a dollar that could have gone to support those who don’t get the opportunity to go to college,’ Summers wrote on Twitter.

‘Student loan debt relief is spending that raises demand and increases inflation. It consumes resources that could be better used helping those who did not, for whatever reason, have the chance to attend college. It will also tend to be inflationary by raising tuitions.’