Borrowers who earn less than $125,000 a year, or families earning less than $250,000, would be eligible for the $10,000 loan forgiveness, Biden announced in a tweet. Pell Grant recipients, undergraduates with the most significant financial need, would receive an additional $10,000 in federal loan debt.
Biden is also extending a pause on federal student loan payments for what he called the “final time” through the end of 2022. He is set to deliver remarks Wednesday afternoon at the White House to unveil his proposal to the public.
If Biden's plan to deliver on his campaign promise survives legal challenges, it could provide a break to many Americans in the run-up to this fall's midterm elections.
More than 43 million people have federal student debt, with an average balance of $37,667, according to federal data. Nearly a third of borrowers owe less than $10,000 and about half owe less than $20,000. The White House estimates that Biden's announcement would erase the federal student debt of about 20 million people.
Proponents say cancellation will narrow the racial wealth gap — Black students are more likely to borrow federal student loans and at higher amounts than others. Four years after earning bachelor's degrees, Black borrowers owe an average of nearly $25,000 more than their white peers, according to a Brookings Institute study.
Still, the action is unlikely to thrill any of the factions that have been jostling for influence as Biden weighs how much to cancel and for whom.
Biden has faced pressure from liberals to provide broader relief to hard-hit borrowers, and from moderates and Republicans questioning the fairness of any widespread forgiveness.
The continuation of the coronavirus pandemic-era payment freeze comes just days before millions of Americans were set to find out when their next student loan bills will be due.
Details of the plan have been kept closely guarded as Biden weighed his options. The administration said Wednesday the Education Department will release information in the coming weeks for eligible borrowers to sign up for debt relief.
Current students would only be eligible for relief if their loans were originated before July 1, 2022. Biden is also set to propose capping the amount that borrowers pay monthly on undergraduate loans at 5% of their earnings.