President Joe Biden’s Executive Order erasing up to $20,000 of federal student loan debt has angered almost as many as it made happy. Applications for student loan forgiveness will be made available beginning in October. Borrowers are advised to apply before November 15 to receive relief before the payment pause expires December 31.
According to a senior administration official, who briefed reporters Wednesday, the president expects almost 20 million borrowers will have student loan debt completely erased. That transformational change in their financial situation will no doubt make them very happy.
Borrowers with student loans above the forgiveness limit who meet income eligibility will be happy their debt is reduced, howbeit not as happy as those whose student loan debt dropped to zero.
Former students whose high incomes make them ineligible and those who have already repaid their student loan debt will be unhappy. Fear of missing out is such a thing that its acronym, FOMO, enjoys ubiquitous use among younger Americans.
Regardless of personal benefit, fiscal conservatives are upset because of the high price tag needed to fund the Biden debt relief.
“Let’s put that $24 billion in context,” explained Deputy Director of the National Economic Policy Bharat Ramamurti in a Friday press briefing. “That represents 1.5 percent of the deficit reduction that we are projecting for this fiscal year before the announcement.”
Ramamurti added the Biden administration considers the loan relief already “fully paid for” since the U.S. is expected to record a $1.7 trillion deficit decrease.
“It is paid for, and far more, by the amount of deficit reduction that we’re already on track for this year,” he said. “Practically speaking, compared to the previous year, $1.7 trillion more are coming into the treasury than are going out. We’re using a portion of that, a very small portion of it, to provide relief to middle class families consistent with the President’s plan.”
Biden’s executive order also extended the pandemic-era student loan repayment freeze until Dec. 31.
Ramamurti noted Americans who chose to continue paying down their loans have been paying loan servicers approximately $2 billion per month. He added that amount is expected to double when the federal loan pause ends in January.
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