Biden Cancels Some Student Loan Debt: What It Means For PA Residents

PENNSYLVANIA — A historic student loan debt forgiveness program will bring thousands of dollars in relief to struggling Pennsylvanians, President Joe Biden announced Wednesday.

The highly anticipated federal plan will forgive student loan debt for Pennsylvanians making $125,000 or less, or families earning $250,000 a year or less, Biden said in a statement posted to Twitter. The president will formally announce the plan at 2:15 p.m.

Recipients of Pell Grants, which usually go to those from lower-income backgrounds, will get an additional $10,000 of forgiveness.

However, it falls far short of getting many students out of the hole they're in, and advocates say the crippling system that bankrupts students needs more reform.

"If SoFI, a student loan refinancing company, could give its CEO a 92% raise last year paying him a grand total of $103 million in compensation and spend $625 million to put its name on the LA Rams football stadium, you know what President Biden can do?" U.S. Sen. Bernie Sanders said Monday. "Cancel all student debt."

Still, the amount is the largest forgiveness of federal student loans per person in history, according to a report by The Hill.

“In keeping with my campaign promise, my Administration is announcing a plan to give working and middle class families breathing room as they prepare to resume federal student loan payments in January 2023,” Biden said on Twitter.

Pennsylvania's Democratic U.S. Sen. Bob Casey applauded Biden's work.

"Under (his) leadership, Senate and House Democrats have passed generational investments in infrastructure, manufacturing and the middle class," he said on social media. "And we’re just getting started."

Outgoing Republican U.S. Pat Toomey was previously outspoken in his opposition to the $10,000 per borrower relief.

"Biden's student loan scheme will force taxpayers to pay for a flawed policy that will allow families making more than $250K eligible for forgiveness," Toomey said. "They're called student loans, not grants. Whoever took out the loan must repay it—not the taxpayers."

Under the new plan, payments on federal undergraduate loans can be capped at 5 percent of a borrower’s monthly income.

Biden also directed officials to extend an existing pause on federal student loan payments until Dec. 31. The pause, implemented to provide significant financial relief to those affected by the coronavirus pandemic, went into effect in May 2020 and was extended several times under the Trump and Biden presidencies. It was scheduled to expire on Aug. 31.

As of 2021, nearly 166 million borrowers owe a collective $1.59 trillion to student loans, more than Americans owe on their auto loans or credit card balances, according to credit reporting agency Experian’s most recent State of Student Loan Debt report.

The average balance per borrower increased slightly in 2021 to $39,487, up nearly $700 from 2020, according to Experian.

Here’s a look at how student loan debt is affecting borrowers in Pennsylvania, according to Lending Tree's Student Loan Hero:

• 2.1 million Pennsylvanians have student loan debt
• The average debt per borrower is $33,426
• The average monthly payment is $283
• The total outstanding debt for Pennsylvanians is $71.5 billion

An August survey conducted by the credit monitoring company ScoreSence revealed only 14 percent of U.S. borrowers with federal student loans on pause could afford the payments with no issues when the forbearance period ends. The survey also revealed that 42 percent of borrowers aren't sure how they will add loan payments back into their budget.

The Biden administration has so far taken a piecemeal approach to student loan forgiveness. In August, the administration canceled $3.9 billion in federal student debt for more than 200,000 borrowers who attended the for-profit ITT Technical Institute. In June, the Department of Education promised to erase $5.8 billion in debt related to Corinthian Colleges.

Through targeted cancellation for specific groups of borrowers, the Biden administration had previously approved nearly $32 billion in student debt for 1.6 million borrowers, The Associated Press reported.

In recent months, Democrats have increasingly called for Biden to cancel a significant portion of student loan debt. Some Democrats, including Senate Majority Leader Chuck Schumer and Sen. Elizabeth Warren of Massachusetts, have called on the president to forgive $50,000 per borrower.