$10K In Student Loan Debt Canceled For Millions Of CA Borrowers

CALIFORNIA — In the Golden State, where students have accrued more loan debt than most other states, a long-awaited federal plan, announced by President Joe Biden on Wednesday, may bring some relief.

Thousands of dollars in student loan debt will be canceled for millions of borrowers in California and other states under the new federal plan, which will forgive $10,000 in student loan debt for borrowers in California making $125,000 or families earning $250,000 a year or less, Biden said in a statement posted to Twitter. Biden is set to formally announce the plan from the White House at 2:15 p.m. EST.

California is home to 3,823,700 student borrowers, who owe an average of $37,084.

An additional $10,000 of forgiveness will go toward borrowers who received Pell Grants for college, which typically go to people from lower-income backgrounds.

The amount is the largest forgiveness of federal student loans per person in history, according to a report by The Hill.

“In keeping with my campaign promise, 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,” Biden said on Twitter.

Under the new plan, payments on federal undergraduate loans can be capped at 5 percent of a borrower’s monthly income.

Biden also directed officials to extend an existing pause on federal student loan payments until Dec. 31. The pause, implemented to provide significant financial relief to those affected by the coronavirus pandemic, went into effect in May 2020 and was extended several times under the Trump and Biden presidencies. It was scheduled to expire on Aug. 31.

As of 2021, nearly 166 million borrowers owe a collective $1.59 trillion to student loans, more than Americans owe on their auto loans or credit card balances, according to credit reporting agency Experian’s most recent State of Student Loan Debt report.

The average balance per borrower increased slightly in 2021 to $39,487, up nearly $700 from 2020, according to Experian.

Here’s a look at how student loan debt is affecting borrowers in YOUR STATE, according to the Education Data Initiative:

• 3,823,700 California residents have student loan debt.
• The average debt per borrower is $37,084.
• 9.7 percent of residents owe student loan debt.
• 16 percent of the state’s indebted student loan borrowers owe less than $5,000.
• 20.2 percent owe $20,000 to $40,000.
• 2.9 percent owe more than $200,000.

An August survey conducted by the credit monitoring company ScoreSence revealed only 14 percent of U.S. borrowers with federal student loans on pause could afford the payments with no issues when the forbearance period ends. The survey also revealed that 42 percent of borrowers aren't sure how they will add loan payments back into their budget.

The Biden administration has so far taken a piecemeal approach to student loan forgiveness. In August, the administration canceled $3.9 billion in federal student debt for more than 200,000 borrowers who attended the for-profit ITT Technical Institute. In June, the Department of Education promised to erase $5.8 billion in debt related to Corinthian Colleges.

Through targeted cancellation for specific groups of borrowers, the Biden administration had previously approved nearly $32 billion in student debt for 1.6 million borrowers, The Associated Press reported.

In recent months, Democrats have increasingly called for Biden to cancel a significant portion of student loan debt. Some Democrats, including Senate Majority Leader Chuck Schumer and Sen. Elizabeth Warren of Massachusetts, have called on the president to forgive $50,000 per borrower.