President Joe Biden is expected to deliver on a campaign promise Wednesday by confirming the cancelation of federal student loan debt.
Here's what we know so far ahead of Biden's speech at 2:15 p.m. EST:
- Anyone with federal student loan debt who makes less than $125,000 a year will see $10,000 wiped off the books
- Couples that make $250,000 or less a year will also see $10,000 wiped
- Recipients of federal Pell Grants will see $20,000 in forgiveness
- The Covid-19 pandemic pause on student loan payments will continue; federal student loan holders that are left with some debt have until January 2023 before their payments will resume.
The decision provides relief for tens of millions of Americans, but also puts pressure on student loan collection companies, like SoFi Technologies SOFI. The company, which touted financial services revenue of $23.5 million in the first quarter (up 264% year-over-year), is trading up more than 7% at $6.60 a share as of press time. Student loans make up more than 38% of SoFi's total lending products.
Other student debt companies, including Nelnet Inc. NNI and Navient Corp. NAVI, saw more modest movement Wednesday ahead of the announcement. Navient was up by 0.18% at $16.31 as of press time. Nelnet hovered at around $85.98 per share, down by 0.14%.
Biden's executive decision is a long-time coming. On the campaign trail in 2020, Biden had pledged to cancel at least $10,000 of student debt per person.
In March, Biden noted on Twitter the need to forgive student loans "as proposed" by Senator Elizabeth Warren of Massachusetts.
The move underscores a major shift in the way the federal government has handled the stark reality of student debt and the financial burden higher education puts on college graduates.
U.S. student loan debt, which ballooned three times greater than it was in the early 2000s, currently totals $1.748 trillion. The outstanding federal loan balance is $1.62 trillion and accounts for 92.7% of all student loan debt.
Earlier this year, some Republican senators pledged to stop Biden from canceling student loan debt, citing inflation fears. However, economists and the Roosevelt Institute maintain that canceling student debt would not be inflationary.
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