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What does Biden’s student debt cancellation mean for Kentuckians?

A man in graduation robes and a mortarboard stands and poses, smiling, for a seated woman in graduation garb taking a photo.
Courtesy of KSU
Students gather at Kentucky State University's 2016 graduation.

A third of Kentuckians with federal student loans could see all of their debt canceled under the Biden administration’s new program. 

Ashley Spalding with the left-leaning Kentucky Center for Economic Policy told WFPL News there are about 210,000 Kentuckians who owe less than the $10,000 the federal government has agreed to waive for most borrowers. That’s around a third of the 616,000 Kentuckians with outstanding student loans. The remaining 406,000 borrowers will see a reduction in their debt balance.

“This is a really good first step in addressing the student debt crisis, and it will help hundreds of thousands of people in our state whose lives and economic choices have really suffered under the weight of student debt,” Spalding said.

Biden’s program will waive $10,000 in student debt for borrowers who make less than $125,000 a year, or who have annual household incomes of less than $250,000. Pell Grant recipients in the same income category will have $20,000 waived.

Most borrowers will not receive the cancellation automatically. Instead they’ll have to apply to get the benefit. 

“That can be a barrier for folks, so we’re really focused on trying to get the word out,” Spalding said.

The U.S. Department of Education said it will provide more information about the application process in the coming weeks. Borrowers can sign up to be notified when the application opens at https://www.ed.gov/subscriptions

Spalding is also hailing the administration’s proposal to lower required monthly payments for borrowers in the income-driven payment plan from 10% of discretionary income to 5%. The Department of Education said the proposed rule will be published “in the coming days” in the Federal Register. The public has 30 days to weigh in before it’s final.

If borrowers continue to make those monthly payments, they will not accrue interest, which keeps outstanding balances from ballooning, Spalding said.

According to the Kentucky Center for Economic Policy, this reduction in payments would have a major positive impact on lower-income borrowers — especially those who did not complete their degree. Research by the center suggests 62% of Kentuckians who start a higher degree leave without completing the program. Nearly half of the people in that group who were studied took out federal student loans.

Student loan cancellation has been touted by some as a way to address racial wealth gaps. Research shows Black Americans, including Black Kentuckians, are more likely to carry student debt than their non-Black counterparts, and that student loan debt has exacerbated existing racial wealth gaps.

However, Spalding said studies also show $10,000 to $20,000 per person would not be enough to close the increased racial wealth gaps caused by student debt.

“Scholars who have studied these issues have shown that the amount of cancellation needs to be at least $50,000 in order to start to address those harms,” she said.

Meanwhile, many Republicans and conservatives are critical of debt cancellation policies. 

The announcement drew swift criticism from U.S. Sen. Mitch McConnell. The Republican leader blasted the decision as “student loan socialism” and “wildly unfair redistribution of wealth toward higher-earning people.”


“Democrats specifically wrote this policy to make sure that people earning six figures would benefit,” McConnell said in a written statement.

McConnell also echoed concerns from some that the program will fuel more inflation by putting hundreds of dollars a month more in people’s pockets.

“President Biden’s inflation is crushing working families, and his answer is to give away even more government money to elites with higher salaries,” he wrote.

Spalding argued that the amount of debt cancellation is too small to increase inflation, and said the driving causes of inflation are due to supply-chain issues and the war in Ukraine.

“A portion of the population having a little less debt — that actually just wouldn’t make a big impact,” she said.

Advocates for the policy have also said the plan to resume collecting payments in January 2023 will help offset any inflationary impacts.
Correction: A previous version of this story misstated the kind of income some monthly payment amounts will be based on. 

Jess Clark is LPMs Education and Learning Reporter. Email Jess at jclark@lpm.org.

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