(Bloomberg) – President Joe Biden’s loan forgiveness plan will eliminate about one-third of student debt owed to the federal government, with low-income borrowers and those living in southern states set to Get the maximum boost. Analysis by the Federal Reserve Bank of New York.
This proposal would cancel approximately 50% of the borrower’s federally held balance, canceling $441 billion-dollar loans, the New York Fed said in a blog post on Tuesday. Borrowers living in communities with median household income below $83,10 – some of them 65% – will receive nearly three-quarters of debt relief, it said.
Federal Reserve research also found that residents of Washington, D.C., will receive the largest average debt relief per eligible borrower. The six states with the largest amounts are in the South: North Carolina, Georgia, South Carolina, Alabama, Mississippi and West Virginia.
Biden’s plan offers forgiveness up to $
Critics of the plan, including Biden’s Republican opponents, say debt relief for Americans who have gone to college — and therefore are likely to earn more anyway — is a Policies that favor the rich.
Debt relief will help struggling borrowers improve their credit scores and catch up with other liabilities such as credit cards and auto loans, the New York Fed said. “A reduction in student debt prevalence and balances will result in substantial financial improvements for borrowers, especially among those with lower incomes,” it said.
Even after the program is implemented, many Americans will still have a sizable debt load and will have to make substantial monthly payments when the pandemic freeze ends in January.
A report from the Federal Reserve Bank of Dallas also released on Tuesday noted that the percentage of borrowers with more than 50 dollars, Over the past five years, student loans have increased by nearly 5 percentage points to 000.4% 2021.
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