U.S. student loan forgiveness has borrowers hoping for vacations, medical school

© Reuters. FILE PHOTO - A graduate holds their mortarboard cap after a commencement ceremony at the University of Southern California (USC) in Los Angeles, California, U.S., May 12, 2017. REUTERS/Patrick T. Fallon

By Kanishka Singh

WASHINGTON (Reuters) - Americans bearing heavy college debt loads welcomed U.S. President Joe Biden's announcement on Wednesday that he would forgive $10,000 in student loans, and some shared hopes they can jettison extra work hours and perhaps take a vacation or return to school.

"I would not have second thoughts when planning a trip or going on a vacation," said John Paul, 49, a restaurant manager in Washington DC who said he took out loans for his son's tuition. "Earlier, it would be at the back of our mind that we have this debt hanging over us. Now we are somewhat relieved."

He was interviewed shortly after the Biden administration announced it would extend a COVID-19 pandemic-linked pause on student loan repayment to the end of the year, while forgiving $10,000 in student debt for borrowers whose income falls below $125,000 a year, or $250,000 for a married couple.

Paul said the relief will cut his outstanding amount of debt in half.

Vincent Joseph, who graduated in 2019 and currently works at a lobbying firm in Washington, said he was happy to hear his remaining $6,500 of debt was likely to be relieved.

"There could be an entire next generation that does not have to work extra hours or additional jobs to repay this debt," he said, noting he had taken on a job in college to pay off his loans.

"Many people work extra jobs and as a result compromise on spending time with friends and family because they are worried about their debt," he said, calling it a small step in the right direction.

Millennials, or those born between 1982 and 2000, "have significantly more student debt, lower levels of homeownership, and less net worth than previous generations," according to research published before the COVID-19 pandemic by the non-partisan Government Accountability Office.

Alexis Horton, 20, a biology major at Howard University, said the announcement is a relief for those who plan further studies.

"As a biology student who wants to go to med school, I do rack up a lot of loans at school, so hearing that I could possibly get $20,000 or $10,000 (off) does sound really good," Horton told Reuters.

Advocates of student debt relief welcomed the step but also urged the Biden administration to do more to deal with systemic problems.

Kyra Taylor, an attorney with the National Consumer Law Center who focuses on student loans, described the step as "life changing for millions of Americans."

The White House estimates its debt relief plan could lead to about 20 million borrowers having their debt completely canceled. About 43 million Americans have federal student loan debt, according to educationdata.org.

Taylor, however, added that the plan does not do enough to help borrowers with larger balances, like many Black Americans, who experts say face heavy debt burdens.

"The administration should take additional actions to address racial inequities that the student loan system has exacerbated, and that means Black Americans, and especially Black women, are burdened by more student loan debt just to access the same opportunities as others," she told Reuters.

The government said it is also forgiving up to $20,000 in debt for recipients of federal Pell Grants, some 6 million students from low-income families, and is proposing a new rule that protects some income from repayment plans and forgives some loan balances after 10 years of repayment.

(Reporting and writing by Kanishka Singh in Washington; additional reporting by Julio-Cesar Chavez and Matt Mcknight; editing by Heather Timmons and David Gregorio)