President Biden announced on Wednesday a plan to relieve $10,000 in student loan debt for low-to-middle income borrowers and extended the pause on student loan payments to Dec. 31, 2022. The announcement comes amid growing concerns of the effect debt relief will have on inflation, a concern the President quickly dismissed during his afternoon press conference.

The three-part plan, announced via a White House Fact Sheet, targets individual borrowers earning $125,000 or less annually and households earning $250,000 or less. No high-income individual or household—those in the top 5%—qualify for student loan forgiveness under the plan. 

“There’s plenty of deficit reduction to pay for the programs—cumulative deficit reduction—to pay for the programs many times over,” President Biden stated at a press conference. “…The outrage over helping working people with student loans I think is just simply wrong, dead wrong.”

Pell Grant recipients will also receive a further $10,000 in forgiveness under the plan, relieving more than 60% of the current borrower population—roughly 27 million Americans—of $20,000 in student loan debt.

“Both of these targeted actions are for families who need it the most: working and middle class people hit especially hard during the pandemic,” said Biden.

Last year, the United States saw a 350-billion-dollar reduction in the deficit, according to the president, and is expected to see a cut of over $1.7 trillion at the end of the fiscal year—the largest deficit reduction in a single-year in U.S. history. 

Along with debt forgiveness, the plan also includes a final extension of the federal loan repayment program. Borrowers must resume payments on Jan. 1, 2023 as the extension terminates on Dec. 31, 2022. 

The final part of the plan aims to repair the student loan program through the creation of an income-driven repayment plan. Under this plan, no American with undergraduate student loan debt will be required to pay above 5% of their discretionary income—half the rate of existing plans. 

The Department of Education also laid out measures to increase the amount of income that is considered non-discretionary, protecting borrowers earning under 225% of the federal poverty line—the rough equivalent of earning $15 an hour. Those under this poverty line will be excluded from making a monthly payment, thus protecting their non-discretionary income from repayment. Borrowers will also be cleared of their debts after 20 years of payments and those with an original balance of less than $12,000 will be cleared after 10 years. The Department of Education plans to cover the unpaid monthly interest students accrue over time, even if that monthly payment is $0.

Borrowers will be able to apply for debt forgiveness in the coming weeks as the Department of Education works to create an application form and process. 

“I believe my plan is responsible and fair,” said Biden. “It focuses the benefit on middle class and working families. It helps both current and future borrowers and will fix a badly broken system…That’s what today’s announcement is about. It’s about opportunity. It’s about giving people a fair shot. It’s about the one word America can be defined by: possibilities.”