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What's happening
President Joe Biden has announced up to $10,000 in student loan debt will be forgiven for all borrowers earning under $125,000.
Why it matters
Student loan debt has become a major economic issue, with 45 million Americans carrying more than $1.7 trillion in federal student loans.
What's next
Biden also extended the current moratorium on student loan payments through the end of the year.
President Joe Biden has extended the current pause on student loan payments, which was set to expire on Aug. 31. In a tweet on Wednesday, Biden announced the moratorium would be extended "one final time" through Dec. 31, 2022.
As expected, the White House also announced a long-awaited executive action erasing up to $10,000 in federal student debt for borrowers making less than $125,000 a year -- or $250,000 for married couples.
The president, who said he would go into more detail in a press conference Wednesday afternoon, also announced that Pell grant recipients will have $20,000 of their student debt erased. Borrowers with undergraduate loans will be able to cap repayment at 5% of their monthly income.
The forgiveness plan could wipe clear the balances of 15 million borrowers, The Wall Street Journal reported, a third of the 45 million Americans who are currently carrying about $1.7 trillion in federal student loans.
"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.
Americans are divided on student loan forgiveness: 59% are concerned it will make inflation worse, according to a CNBC/Momentive poll last week, which also said 30% of adults opposed any kind of student loan forgiveness.
Democrats in Congress had pressed for more debt forgiveness -- at least $50,000 -- while Republicans said the president lacked the authority to cancel billions in student debt. Republican Sen. Mitt Romney introduced legislation to block Biden from forgiving debt but the bill never advanced in the Democrat-controlled Senate.
"Canceling student loan debt is yet another giveaway to the wealthy by Washington Democrats," Missouri Rep. Jason Smith, a Republican who serves on the House Budget Committee, tweeted Wednesday morning before the announcement. "And 87% of Americans who don't have student debt will be forced to pay for the 13% who chose to take on student loans," Smith added.
According to a Wharton School of Business research model, the one-time debt forgiveness of $10,000 per borrower will cost taxpayers around $300 billion over the next 10 years.
Read more: Student Loans Have Been Paused Again but You Should Probably Keep Making Payments Anyway