White House officials have been weighing – and leaning toward – the cancellation of up to $10,000 in student loan debt per borrower tied to an income threshold, with an official announcement set for Wednesday, CNN has learned.
According to multiple sources familiar with the discussions, the plan is designed to offer the forgiveness to individuals who earn less than $125,000 per year. It is not clear that a final decision on the details of the announcement has been made, and there could always be 11th-hour changes.
A source familiar with the plans confirmed to CNN that the announcement will be made on Wednesday.
In addition to that baseline of student loan debt forgiveness for individuals who fall under a certain income level, administration officials have also recently discussed the possibility of additional forgiveness for specific subsets of the population, according to sources familiar with internal discussions in the administration.
White House officials have also been leaning toward a final short-term extension of the freeze on federal loan repayments that has been in place since 2020. The freeze is scheduled to expire on August 31, and the administration has for months signaled it is preparing for the pandemic-era action to end.
Payments have not been required on most federal student loans since March 2020, when the Covid-19 pandemic hit the US, greatly affecting the economy. Biden has extended the pause four times, most recently in April, arguing that it was necessary to allow federal student loan borrowers to get back on their feet.
A final short-term extension, should Biden select that path, would likely push the restart of payments until after the election. Detailing its expiration in concrete terms, however, would also provide Biden with something to point to that would ostensibly counter at least some of the increased economic demand created by any corresponding debt forgiveness.
In recent days, White House officials have been in communication with lawmakers to discuss their thinking on student loan debt forgiveness, ahead of the current pause on payments expiring. And Biden on Tuesday spoke on the phone with three Democratic lawmakers who have been pushing him to cancel as much as $50,000 in debt per borrower – including Sens. Elizabeth Warren of Massachusetts and Raphael Warnock of Georgia, sources told CNN – to discuss the outstanding details in advance of his expected announcement.
The President also spoke with Senate Majority Leader Chuck Schumer, with the New York Democrat using the conversation to make a final push to cancel as much student loan debt as possible, according to a Democrat familiar with the call. Schumer has pressed for two years for large scale loan forgiveness and has spoken repeatedly with White House officials in an effort to advance the idea in an administration that has been split about its merits, both politically and economically.
The White House has suggested in the past that Biden was considering canceling $10,000 per borrower but excluding those who earn more than $125,000 a year.
Administration officials in recent days have also discussed the possibility of offering additional forgiveness to certain people.
One of the ideas discussed, per sources familiar with deliberations within the administration, has been supplemental debt forgiveness for Pell Grant recipients. However, the fact that the idea has been discussed does not mean that the White House will ultimately decide to go this route, and it is not clear that a final decision on the details of the administration’s forthcoming announcement has been made.
Additional debt forgiveness on top of the $10,000 amount could potentially be significant, depending on the maximum size of the supplemental cancellation. Pell Grants are offered to students that demonstrate “exceptional financial need,” according to the Department of Education. Extending extra forgiveness for Pell Grant recipients would mark an attempt to identify a subset of the population who might most benefit from student loan debt cancellation.
“The President will have more to say on this before August 31. As a reminder, no one with a federally held loan has had to pay a single dime in student loans since President Biden took office, and this Administration has already cancelled about $32 billion in debt for more than 1.6 million Americans – more than any Administration in history,” a White House official said when asked for comment.
Setting an income cap, which has been the subject of intense debate both inside and outside the administration, was also crafted as a buffer against criticism that the forgiveness would benefit those with the means to manage their debt payments.
Education Secretary Miguel Cardona said Sunday that Americans can expect a decision from the administration on student loans in the “next week or so.” With less than two weeks to go, Americans have been left guessing for weeks whether Biden will extend the current moratorium or, perhaps, forgive some of their debt.
“We’ve been talking daily about this, and I can tell you the American people will hear within the next week or so from the President and the Department of Education on what we’re going to be doing around that,” Cardona told NBC’s Chuck Todd on “Meet the Press.”
He did not elaborate on the details, saying he would not get ahead of the announcement.
Some Democratic lawmakers and advocates have been urging Biden to broadly cancel up to $50,000 in student loan debt per borrower, but the President has consistently pushed back on canceling that much.
Biden has canceled more student loan debt than any other president, with his administration authorizing the cancellation of nearly $32 billion in loans largely for borrowers who were defrauded by their for-profit colleges and for permanently disabled borrowers.
Marc Goldwein, the senior vice president and senior policy director for the Committee for a Responsible Federal Budget – a nonpartisan group that tracks federal spending – argued against the plan in an interview with CNN’s Poppy Harlow on “Newsroom” Tuesday morning.
He believes that canceling $10,000 of debt for each borrower will likely increase inflation, undermine the stated goal of Democrats’ Inflation Reduction Act and will not significantly decrease the racial wealth gap.
“The Inflation Reduction Act saves maybe $300 billion dollars in the first 10 years. If we cancel $10,000 of debt and just extend the pause a few months, we’re going to be at about that much in terms of new cost,” he said. “All the deficit reduction will be wiped out. At the same time, we’re probably going to do more to increase inflation from debt cancellation than any inflation reduction from the Inflation Reduction Act.”
This story has been updated with additional reporting.
CNN’s Sam Fossum, Betsy Klein and Veronica Stracqualursi contributed to this report.