Most relief from Biden’s student loan forgiveness plan flows to lower-income borrowers, not higher

A TV ad trolled President Joe Biden by using actors to portray blue-collar workers who, insincerely, sang the praises of his student loan debt forgiveness plan.

"Biden’s plan to pay other people’s college loans using my tax dollars is a great idea," a waitress says with mock enthusiasm. 

"Want to be a struggling artist?" a mechanic says. "College is on me."

The ad, which was posted to YouTube Aug. 26, ends with a narrator repeating words that appear on the screen: 

"Tell Congress, stop Biden’s bailout for rich kids." 

The Republican National Committee and several GOP lawmakers have echoed the sentiment that Biden’s plan serves the rich at the expense of the working class.

Some borrowers who have incomes well above the median household income in America do qualify for Biden’s debt relief. 

But the vast majority of the relief is concentrated on borrowers with lower incomes, according to independent estimates.

Student debt is the largest source of nonmortgage debt owed by families, the latest Federal Reserve Survey of Consumer Finances, released in 2020, shows.

Under Biden’s plan, $10,000 of federal student loan debt will be waived for individuals earning less than $125,000 per year or for couples earning less than $250,000; an additional $10,000 will be waived for people falling under those income thresholds who have also received Pell Grants, which serve low-income Americans. 

Meanwhile, there are questions about whether Biden’s plan would hold up in court. 

The minute-long attack ad is from American Action Network, a conservative, nonprofit advocacy organization whose leadership includes former elected officials who are Republicans. 

To back up the ad’s claim about a bailout of the rich, network spokesperson Calvin Moore pointed to the median household income in America which, according to the latest Census Bureau figures, was $67,521 in 2020, and noting that the $250,000 income cap in Biden’s plan is nearly four times higher. Moore also cited a Washington Post editorial that said Biden’s plan subsidizes "the education debt of people with valuable degrees," including "white-collar professionals with high future salaries." 

The income caps in Biden’s plan make borrowers with incomes well above the median eligible for relief. But that doesn’t make it a bailout of the rich.

The White House estimated that, among borrowers who are no longer in school, 87% of relief dollars will go to those earning less than $75,000 a year. The Education Department told us it had to deduce the income of many borrowers using Census data and statistical models. With any model, there’s going to be uncertainty.

Two independent estimates show student debt forgiveness mostly impacts on people with lower incomes.

The University of Pennsylvania’s Penn Wharton Budget Model, in an updated assessment after Biden’s plan was released, estimated that about 74% of the debt relief will go to American households in the bottom 60% by income, or those making less than $82,400 a year. 

The assessment estimates that 4.7% of the relief will go to households earning between $141,096 and $212,209;  just less than 1% will go to those earning between $212,209 and $321,699.

Featured Fact-check

Democratic National Committee

stated on April 7, 2010 in a press release.

"The Health Care and Education Reconciliation Act is the largest-ever investment in higher education."

That roughly squares with a Federal Reserve Bank of New York analysis from April. It estimated that $10,000 in relief combined with a $75,000 income cap gave more than 80% of the benefits to people in neighborhoods where incomes were less than $78,000 a year. 

Those findings comport with an open letter sent to Biden in January 2021 by 54 scholars who study student debt. The letter says debt cancellation would disproportionately benefit students who have lower-income jobs after college. 

Student debt expert Mark Kantrowitz told PolitiFact that with the Biden plan’s focus on Pell Grant recipients, most of the people eligible for the debt relief are from lower-income families.

He estimated that, based on the latest federal figures available, 94% of undergraduate students who received a Pell Grant in 2015-16 had an annual family adjusted gross income of less than $60,000.

American Action Network claimed that Biden's student debt forgiveness plan is a "bailout for rich kids."

Some borrowers with incomes well above that of the median American household qualify for the debt relief. 

But the vast majority of student loan forgiveness will go to people on the lower end of the income scale. By one independent estimate, 75% of the debt relief will go to households in the bottom 60% by income.

The claim contains an element of truth but ignores critical facts that would give a different impression — our definition of Mostly False.

RELATED: Is Joe Biden’s student debt forgiveness plan legal?

RELATED: Fact-checking statistics about Biden's student loan forgiveness plan

RELATED: The Biden Promise Tracker and Biden’s promise to forgive student loan debt

RELATED: IRS won’t tax student loan relief, but some states might