The Realities of Student Loan Forgiveness

President Joe Biden

President Joe Biden signing an executive order

Last month, President Biden announced his plan to forgive a portion of student loan debt, and offer relief for some 45 million borrowers, over one million of who reside in North Carolina. Here’s how it works: If you took out a federal student loan, and you earn less than $125,000 per year (or less than $250,000 as a married couple), you could be eligible to have 10% of your debt forgiven. If you have a student loan and also received a Pell Grant through the Department of Education, you could get up to $20,000 of your debt forgiven (note that according to the White House, nearly all Pell Grant recipients come from families who earn less than $60,000 per year). It is an admirable initiative to be sure, but one that is fraught with questions about its legality, political motives, economic viability, and fairness.


First of all, is Biden’s plan fair? Right-winger Reed Rubinstein, director of oversight and investigations for the America First Legal Foundation told TIME, “This is such a slap in the face to everybody who did what they were supposed to do.” Translation? Millions of students honored the terms of their loans and worked hard to pay them back, and they are not eligible for one red cent of relief. “It’s also not fair to the untold number of Americans who never went to college,” said Alfredo Ortiz, CEO of the Job Creators Network. Moreover, if you took out a private loan, the Biden plan won’t help you either. One could also argue that it’s not fair to all of us taxpayers who expected to be repaid with interest for every dollar we loaned these students. Speaking of taxpayers, the student loan forgiveness program has one catch: recipients of relief must count the amount of debt forgiven as personal income. That means about 27 million low-income students could be on the hook to pay taxes on $20,000 of income. It doesn’t seem fair, but it’s a harsh reality and one that was best explained in a classic scene from Leave it to Beaver.

Beaver: So Wally, you’re really gonna make $10 a day?
Wally: Sure, and they’re gonna take withholding out of it.
Beaver: What’s withholding?
Wally: That’s money they take out of your salary to run the government with.
Beaver: Gee, I didn’t know they took money away from kids to run the government.
Wally: Sure, even if you’re a little baby and you have some money, they’ll come and take it away from you.


In 2020, Joe Biden campaigned on how we needed to help students saddled with college debt. At that time, education debt topped $1.7 trillion dollars. But while debt was high, talk was cheap. During his first week in office, the President signed a record number of executive orders about everything but, you guessed it, student debt. Biden, who had spent most of his adult life in and around the Capitol, hinted that he needed Congressional support to enact a meaningful student debt forgiveness program, so he did nothing for two years. Then suddenly a little more than two months before the midterm elections, he announced his bold plan. There’s nothing like coming to the rescue of 40 million voters to motivate a politician.


Not everyone is a fan of Biden’s rescue plan for students. Alfredo Ortiz commented to TIME that, “A student loan bailout will further exacerbate inflation, increase the deficit, and lead to higher taxes.”

It begs the question, should Biden’s program be put on hold until inflation is under control? The answer would seem to be yes.


President Biden is relying on the 2003 HEROES Act for the legal authority to launch his student loan forgiveness program. The Act gives the Secretary of Education authority to “change student financial assistance programs during a war or national emergency.” In this case, Biden claims the pandemic and its aftermath qualify as a national emergency. But critics like Third Way’s Vice President Lanae Erickson disagree. “It’s on shaky legal ground,” he told TIME’s Brian Bennett. 

Biden’s program is supposed to start in January, but anyone expecting to receive loan relief then may be disappointed if legal challenges ensue. Nevertheless, regardless of the pitfalls, controversies, and potential delays associated with Biden’s loan forgiveness program, the White House recommends that qualified borrowers visit to apply. Or, if you’re skeptical you can visit its companion website,


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