US President Joe Biden is to forgive the student loan debts for millions of borrowers, and will extend a pause on student loan repayments until the end of this year.
Mr Biden said on Twitter that his administration would forgive $20,000 in student loan debt for borrowers who went to college on government grants, and would forgive $10,000 for those who received no funding.
Some six million students from low-income families have received Pell Grants to fund their education.
The plan applies to those who earn less than $125,000 a year.
"In keeping with my campaign promise, my administration is announcing a plan to give working and middle class families breathing room," Mr Biden said in a statement.
His remarks come less than three months before midterm congressional elections, where the issue is seen as a vote winner for Democrats.
President Biden has been under heavy pressure for months from the senior Senate Democrat, Majority Leader Chuck Schumer, and lawmakers from the left of the party to take action, who welcomed the move.
The proposed debt relief falls far short of their goal of securing complete forgiveness, but it is strongly opposed by Republicans who believe that it discriminates against those who have spent years paying off their own debts.
$25,000 average debt
US colleges can often cost anywhere between $10,000 and $70,000 a year, leaving graduates with crushing debt as they enter the workforce.
According to government estimates, the average debt for US college students when they graduate is $25,000, a sum many spend years or even decades paying back.
In total, some 45 million borrowers nationwide owe a collective $1.6 trillion, according to the White House.
Cutting $10,000 in federal debt for every student would amount to $321 billion of federal student loans and eliminate the entire balance for 11.8 million borrowers, or 31% of them, a New York Federal Reserve study shows.
A pandemic-linked government pause in student loan interest and payments is due to expire at the end of August.
Borrower balances have been frozen since the beginning of the Covid-19 outbreak, with no payments required on most federal student loans since March 2020.
'A giant step forward'
"With the flick of a pen, President Biden has taken a giant step forward", said a joint statement by Chuck Schumer and Senator Elizabeth Warren.
"The positive impacts of this move will be felt by families across the country, particularly in minority communities," it added.
Republican National Committee chair Ronna McDaniel called the plan a "bailout for the wealthy".
"As hardworking Americans struggle with soaring costs and a recession, Biden is giving a handout to the rich," she said.
"Biden's bailout unfairly punishes Americans who saved for college or made a different career choice, and voters see right through this short-sighted, poorly veiled vote-buy," she added.
