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Biden’s Student Loan Plan Wipes Out Debt for 20 Million Americans—But Leaves Millions Behind

6 minute read

President Biden himself previewed the backlash over his plan to forgive up to $20,000 per borrower in federal student loan debt on Wednesday. “Some think it’s too much,” he said in remarks at the White House. “Some think it’s too little. But I believe my plan is responsible and fair. It focuses the benefit on middle-class and working families.”

The plan will forgive $10,000 in federal student loan debt for people who make less than $125,000 per year, and up to $20,000 for borrowers who attended college with Pell Grants, designed to help low-income students, and meet the same income requirements.

His long-delayed decision will provide debt relief to about 43 million Americans and will eliminate student debt for about 20 million, according to White House estimates.

Nearly eight million borrowers who qualify for forgiveness and whose financial information is already on file with the Department of Education could have the debt forgiveness automatically applied to their accounts. The remaining borrowers will need to apply via an application that will be launched later this year.

About 45 million Americans owe a collective $1.6 trillion in federal student loan debt. By White House estimates, Biden’s plan will leave about two million federal borrowers with no student debt relief, and about 25 million will still be left with some student debt. Any private loans will be untouched by the program.

Criticism of the plan

The criticism of his plan was swift and came from both ends of the political spectrum.

Read More: Biden Promises to Forgive Student Debt Up to $20,000. Here’s How It Will Work—and Who’s Eligible

NAACP President Derrick Johnson said the policy would leave too many Black borrowers behind. “President Biden’s decision on student debt cannot become the latest example of a policy that has left Black people—especially Black women—behind,” he said in a statement. “This is not how you treat Black voters who turned out in record numbers and provided 90% of their vote to once again save democracy in 2020.”

While white borrowers collectively owe just over half of the country’s student debt balance, Black borrowers owe more on average. Black women hold the most substantial student debt burden, owing an average of $41,466 one year after graduating from college, compared to $27,606 for Asian women and $33,851 for white women, according to the American Association of University Women.

And that burden is compounded by the gender wage gap and the racial wealth gap that Black women encounter in the workplace. Four years after graduation, Black graduates owe nearly $25,000 more, on average, than white graduates, according to a 2016 Brookings report.

“We tend to look at who is struggling the most with student debt, and that is Black borrowers. They are more likely to borrow and borrow more and struggle more with repayment,” says Victoria Jackson, assistant director of higher education policy for the Education Trust, a nonprofit that advocates for educational equity.

“When we look at that gap, $10,000 or $20,000 just isn’t even enough to cover what people are borrowing to complete a bachelor’s degree,” Jackson says.

And she worries that the means-testing policy of excluding those who make more than $125,000 ignores the reality of the racial wealth gap. “For Black folks, even if they’re making over $125,000, that often is not an accurate reflection of the resources they have available to them to repay their student loans,” she says.

The Education Trust is among the advocacy groups calling for debt cancellation of $50,000 per borrower.

Massachusetts Sen. Elizabeth Warren, Vermont Sen. Bernie Sanders, and other Democrats had championed $50,000 in across-the-board loan forgiveness, saying it would be an important step toward closing the racial wealth gap and helping Black borrowers, who have been disproportionately burdened by student debt. But Biden had indicated months ago that his plan wouldn’t go that far.

“We have got to do more,” Sanders said in a statement on Wednesday. “At a time of massive income and wealth inequality—education, from pre-school through graduate school, must be a fundamental right for all—not a privilege for the wealthy few.”

Charlie Eaton, an assistant professor of sociology at the University of California, Merced, says the policy will be “transformative.” But he recently published an analysis showing that eliminating $50,000 in debt for those who make less than $150,000 (a higher ceiling than Biden’s policy) would wipe out the entire debt burden for 76% of borrowers, compared to wiping out the burden for 32% of borrowers when eliminating $10,000 in debt.

But while many liberal advocates are calling for more significant debt cancellation, conservatives swiftly criticized the Biden Administration for taking any action at all. Senate Republican Leader Mitch McConnell called the policy a “slap in the face to every family who sacrificed to save for college, every graduate who paid their debt, and every American who chose a certain career path or volunteered to serve in our Armed Forces in order to avoid taking on debt.”

“This policy is astonishingly unfair,” he said.

“Today, [Biden] forced every American who didn’t attend college or has already paid off their loans to now pay off others’ debts,” Florida Sen. Rick Scott said in a tweet.

What’s in the plan

Under the Biden Administration’s plan, about 27 million people will be eligible to receive up to $20,000 in debt relief because they received Pell Grants to attend college, according to an estimate by the U.S. Education Department. Pell Grant recipients represent about 60% of all student loan borrowers, and Black students are about twice as likely as white students to receive a Pell Grant.

According to White House estimates, 90% of debt relief will go toward those earning less than $75,000 a year.

Biden also extended the pandemic-related pause on federal student loan payments “one final time” through Dec. 31. And he lowered the monthly payments borrowers will have to make on their loans, from 10% to 5% of their discretionary income, while also removing added interest, ensuring that borrowers’ loan balance won’t grow as long as they’re making monthly payments.

The plan will cost upwards $300 billion over 10 years, according to the Penn Wharton Budget Model. But others note that some of the mounting student debt was unlikely to be paid off by borrowers in the first place.

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Write to Katie Reilly at Katie.Reilly@time.com