The country's "skyrocketing cumulative federal student loan debt - $1.6 trillion and rising for more than 45 million borrowers - is a significant burden on America's middle class," according to the White House.
Many Democrats had pushed for as much as $50,000 (£42,309) per borrower, but the move was welcomed as the party prepares for the November midterm elections.
"A college degree or certificate should give every person in America a leg up on securing a bright future," said Education Secretary Miguel Cardona.
"However, for far too many people, student loan debt has hampered their ability to achieve their goals, such as purchasing a home, starting a business, or providing for their families."
According to economists, canceling the debt will free up hundreds of billions of dollars for new consumer spending, which could be aimed at homebuying, adding a new wrinkle to the country's inflation fight.
Republicans, who hope to retake control of Congress in November, oppose the move, claiming it is unfair because it benefits people with higher incomes disproportionately.
"President Biden's student loan socialism is 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 specific career path or volunteered to serve in our Armed Forces to avoid debt," Senate Minority Leader Mitch McConnell said.