WASHINGTON — President Biden will announce a decision on Wednesday about his plans for student loan debt relief, a highly anticipated moment that could affect about 45 million borrowers nationwide, according to people familiar with the matter.
Although details of the plan were still being finalized, White House aides have said Mr. Biden was weighing a targeted plan that would provide $10,000 of debt relief for borrowers who make below a certain level of income.
Mr. Biden also is expected to extend a pause on loan payments for all borrowers, a Trump-era program that has been in effect since the start of the pandemic.
The federal government, the main lender for Americans who borrow to fund their higher education, holds $1.6 trillion in student debt. Mr. Biden has faced calls throughout his presidency to cancel a chunk of it, driven by borrowers and the progressive wing of the Democratic Party. He backed the idea of some relief on the campaign trail in 2020, saying: “I’m going to make sure that everybody in this generation gets $10,000 knocked off of their student debt as we try to get out of this godawful pandemic.”
But White House aides say the president has agonized over the decision, questioning whether cancellation should apply to students of both public and private universities and saying he does not want the relief to apply to those earning high incomes.
The decision will add fuel to debates raging in Washington — and within the Democratic Party — about economic fairness and the potential to exacerbate an inflation rate that has reached a 40-year high.
Mr. Biden had promised a decision by the end of the month, but he is expected to return to the White House on Wednesday from Delaware, where he is on vacation with his family.
“The president will have more to say on this before Aug. 31,” said Abdullah Hasan, a White House spokesman. “No one with a federally-held loan has had to pay a single dime in student loans since President Biden took office.”
Mr. Hasan also noted that the Biden administration has “already canceled about $32 billion in debt for more than 1.6 million Americans,” a reference to actions to revive and expand targeted relief programs that had all but stopped functioning during the Trump administration.
The Biden administration has wiped out debts for eligible public service workers, permanently disabled borrowers, defrauded students and people whose schools abruptly closed while they were enrolled.
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Mr. Biden’s decision is likely to draw criticism from the left and the right. The amount of debt cancellation Mr. Biden is considering does not go nearly as far as many Democratic lawmakers and progressive groups, including racial justice advocates, have asked for. Senator Chuck Schumer of New York, the majority leader, other influential Democrats and several civil rights organizations have pushed Mr. Biden to forgive $50,000 per borrower.
Mr. Schumer spoke Tuesday evening on the phone with Mr. Biden, appealing to the president on moral and economic grounds to cancel as much debt as possible, according to a Democrat familiar with the conversation.
White House officials have quietly been preparing for months for the likelihood that Mr. Biden would ultimately decide to pair targeted loan forgiveness with an eventual restart of payments.
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Administration officials say that the combination of eventually restarting payments for all, while forgiving debt for a targeted group, will not add to rising prices. They say the relief will help lower-income borrowers who are struggling to afford soaring food and rent.
But Republicans and some Democratic economists say the policies will add to inflation by giving consumers more money to spend.
Derrick Johnson, the president of the N.A.A.C.P., said on Tuesday that if Mr. Biden moves forward with the plan of providing just $10,000 of relief with income caps, “we’ve got a problem.”
“Tragically, we’ve experienced this so many times before,” Mr. Johnson said in a statement, noting the Senate’s failure to pass police reform. “President Biden’s decision on student debt cannot become the latest example of a policy that has left Black people — especially Black women — behind.”
Kristin McGuire, 40, said that $10,000 would not make an enormous difference in what she owes for the bachelor’s degree in public administration she earned at California State University in 2005. Ms. McGuire borrowed $24,000, but with interest and fees, her debt has ballooned to $50,000.
That is a common story among the Black classmates she studied with, said Ms. McGuire, the executive director of Young Invincibles, a young-adult political advocacy group. “All of us owe more now than when we started,” she said.
Still, the payment pause has given her and her husband — who also owes $50,000, for loans he took for an associate degree from a for-profit school — financial breathing room. The $400 a month she saved by not paying her loans for the past two years let her put more money into paying her mortgage, allowing her to refinance at a lower rate.
“It let us really start to save and build the generational wealth that we’d been blocked out of,” Ms. McGuire said.
Republicans have called any debt cancellation a handout to largely high-income college graduates. Some economists warn it could lead colleges and universities to raise tuition prices, in anticipation of future loan relief.
Congressional offices, outside groups and even the companies that service federal student loans have been left to guess at Mr. Biden’s eventual move. Officials at two loan servicers — which have been fielding calls all month from borrowers seeking guidance about whether they will have bills due again in September — said that they had not received any guidance from the Education Department as of Tuesday about the administration’s plans.
“I don’t know what the plan is, nor have servicers even been consulted about how they would do that and what’s possible to implement,” said Scott Buchanan, the executive director for the Student Loan Servicing Alliance, a trade group. “That’s my deep fear — that they announce something here and it’s not doable.”
Erica L. Green contributed reporting.
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