Biden cancels $10,000 in student debt for millionson August 24, 2022 at 5:06 pm

US President Joe Biden will cancel up to $10,000 (£8,474) in federal student loans for millions of Americans who earn less than $125,000 each year. 

Mr Biden will also forgive $20,000 of debt for students on Pell Grants, which applies to those in greatest financial need.

The president will provide the details of his plan at 14:15 EST (18:15 GMT). 

An estimated 43 million Americans owe an estimated combined total of $1.6tn in federal student debt.

Almost a third owe less than $10,000. 

“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,” Mr Biden said on Twitter.

The announcement follows more than a year of intense internal White House debate and mounting pressure from progressive Democrats. Top Democrats Senate Majority Leader Chuck Schumer of New York and Senator Elizabeth Warren of Massachusetts, are among those who had pushed Mr Biden to use his executive power to wipe out borrower debts.

Wednesday’s plan falls short of the $50,000 per borrower plan that Mr Schumer and Ms Warren had asked for.

A one-time cancellation of $10,000 for each borrower earning a maximum of $125,000 will cost the federal government around$300bn, according to an estimate from the Penn Wharton budget model at the University of Pennsylvania.

Republicans and some moderate Democrats have said debt cancellation will add to inflation by giving Americans more money to spend.

House minority leader Kevin McCarthy, a Republican from California, quickly criticised the plan on Twitter: “Who will have to pay for Biden’s debt transfer scam? Hard-working Americans who already paid off their debts or never took on student loan debt in the first place,” he wrote.