Biden Announces Student Loan Debt Relief: What It Means For Wisconsin

WISCONSIN — Thousands of Wisconsinites who took out loans for college can expect to see large parts of their debt melt away under a long-awaited federal plan announced by President Joe Biden on Wednesday.

Recipients of federal Pell Grants — which are typically given to students who express the highest need and students from lower-income backgrounds — will see the largest relief under the plan, up to $20,000, while other borrowers will likely see $10,000 in relief, Biden announced in a statement posted to Twitter.

The plans will affect Wisconsin borrowers making $125,000 or less per year, and families earning less than $250,000 per year, Biden said. A formal announcement on the plan is expected from the White House at 1:15 p.m.

Student loan debt in Wisconsin is lower on average, according to the Education Data Initiative. The Badger State is home to over 727,000 student loan borrowers, making up about 12 percent of the state who on average owe just over $31,000, according to Education Data.

Of the borrowers in Wisconsin, about 23.5 percent owe between $20,000-$40,000, while 17 percent of borrowers owe less than $5,000, according to Education Data. Just 1.5 percent of borrowers in Wisconsin owe more than $200,000.

“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.

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

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.

SEE ALSO: Loans Canceled For More Former Wisconsin ITT Tech Students

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.

U.S. Rep. Gwen Moore, a Democrat who represents parts of Milwaukee, reacted positively to the news. In reply to Biden's announcement on Twitter, she called it "a powerful step to help rebuild the middle class & narrow the racial wealth gap among borrowers."

U.S. Sen Tammy Baldwin, a Democrat who represents Wisconsin, called the measure "a welcome relief for so many working families in Wisconsin," via a statement on Twitter.