Women hold two-thirds of student debt. Biden’s loan relief could ease that burden

Forgive and forget. President Joe Biden yesterday announced his intention to cancel up to $10,000 in federal student loan debt for millions of borrowers across the U.S., and an additional $10,000 for Pell Grant recipients. The long-awaited decision will have an enormous impact on the roughly 45 million Americans with federal student loans, especially women.

Women hold two-thirds of student debt in the U.S., according to the American Association of University Women, with an average balance of $31,276. Factor in the gender pay gap that widens as women age, become parents, and progress in their careers, and women take about two years longer than men to repay their student loans.

“This is going to be impactful for women across the country,” White House deputy communications director Kate Berner said in an interview yesterday.

Biden’s plan forgives up to $10,000 in student debt for people earning under $125,000 a year and households earning less than $250,000 annually. It also wipes out up to $20,000 in loans for recipients of Pell Grants, which are given to low-income students. Black students and graduates make up the bulk of Pell Grant recipients and are twice as likely as white borrowers to receive them.

The White House estimates that the loan forgiveness plan will provide debt relief to 43 million people and completely eliminate student debt for 20 million Americans, reducing the $1.6 trillion that U.S. borrowers owe in federal student loans. This being said, for borrowers with tens of thousands in student loans, $10,000 or even $20,000 in relief will still leave them with large sums to pay off.

The Biden administration’s plan, however, does take some steps to provide relief even for borrowers who will still owe large sums. Reforms to income-based repayment plans aim to prevent interest from accruing and driving up total balances even as borrowers pay their loans each month. That will hopefully prevent stories like Keona Tranby’s, for instance. In an interview with Fortune earlier this year, the 32-year-old recounted how she paid off $28,800 in student loans over the past 10 years. But over that time span, her total balance increased from just over $50,000 to $62,000.

“People can start finally to climb out from under that mountain of debt,” Biden said in a speech yesterday. “To finally think about buying a home, or starting a family, or starting a business. And by the way, when this happens the whole economy is better off.”

The announcement comes less than three months before the 2022 midterm elections. While Biden did not cancel student debt entirely—as many progressives have called for—the relief could give Democrats a boost with voters ahead of November.

Emma Hinchliffe
emma.hinchliffe@fortune.com
@_emmahinchliffe

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