Biden cancels $10,000 in student loan debts

Americans to get $10,000 in student debt cancelled if they earn $125,000 or less, US President Joe Biden announces, BBC reported.

Canceling the debt will free up hundreds of billions of dollars for new consumer spending, adding a new wrinkle to the country's inflation fight, economists say.

Democrats have pushed for Biden to forgive as much as $50,000 per borrower, arguing that the debt makes it impossible for younger Americans to save for home down payments or other big consumer purchases. Republicans argue the move will disproportionately help people earning higher incomes.

US consumers carry a massive $1.75 trillion in student loan debt, most of it held by the federal government, the result of private and state-backed university tuition fees that are substantially higher than in most other rich countries.

Cutting $10,000 in federal debt for every student would amount to $321 billion of federal student loans and eliminate the entire balance for 11.8 million borrowers, or 31% of them, a New York Federal Reserve study shows.

A pandemic-linked government pause in student loan interest and payments is due to expire at the end of August. Borrower balances have been frozen since the beginning of the Covid-19 outbreak, with no payments required on most federal student loans since March 2020.