If Biden Enacts Broad Student Loan Forgiveness, It May Look Like This
The debate about broad student loan cancellation continues. President Biden and top White House officials have indicated that some sort of widespread student loan forgiveness initiative is under serious consideration, but no final decisions have been made. Officials have previously suggested that a decision on executive action to cancel student loan debt would be made prior to the end of the ongoing student loan payment pause. The payment pause is set to expire on August 31, 2022.
While it is too soon to know whether Biden will actually take action to unilaterally cancel student loan debt using executive authority, it is becoming clearer what it might look like if he does. Here are the details.
Student Loan Forgiveness Would Be Under $50,000 Per Borrower
While student loan borrower advocacy groups and top Democrats in Congress have been urging Biden to cancel $50,000 or more in student debt for every borrower, he has definitively ruled that out. “I am not considering $50,000 in debt reduction,” Biden said at a press conference in April.
That means that if Biden does move forward with some sort of broad student loan cancellation initiative, it would be for under $50,000. Biden has in the past consistently supported calls for $10,000 in student loan forgiveness, and this appears to be a figure that White House officials are generally more comfortable with.
Any executive action to unilaterally cancel student loans would almost certainly be limited to federal student loans only. But it is unclear whether Biden would limit the relief further to only Direct federal student loans or government-owned federal student loans, or whether it could also include commercially-held FFEL-program student loans, as well.
Student Loan Cancellation Without Income Limits Could Be Broad and Automatic
If Biden decides to use executive action to cancel student loan debt without imposing limits or restrictions based on a borrower’s income, the resulting loan forgiveness could be implemented fairly broadly and easily by the Department of Education. It likely could be done automatically, as no application would necessarily be required, and borrowers could see the benefits relatively quickly.
Cancelling $10,000 in federal student loans for every borrower would wipe out the student loan debt for over 16 million people, representing around a third of all borrowers, according to the Center for American Progress.
Student Loan Forgiveness With Income Limits Could Get Complicated
White House officials are reportedly considering imposing income restrictions on any new student loan forgiveness initiative, however. Biden has previously indicated that he opposes student loan cancellation that might benefit doctors, lawyers, and other high-income earners, as well as graduates of elite private institutions (even though only a tiny sliver of student loan borrowers attended such institutions). Administration officials are reportedly considering an income limit of $125,000 for single borrowers.
But imposing income restrictions on student loan cancellation could be complicated. Federal law restricts the ability of the IRS to share income tax information with other federal agencies, and the Department of Education has no mechanism to automatically determine a student loan borrower’s income. As a result, if the administration establishes income eligibility limits for a student loan cancellation initiative, borrowers may be required to submit a formal application, which then would have to be reviewed and processed by Department of Education officials or the Department’s contracted loan servicers.
Given that millions of borrowers would apply, this would likely cause additional strains on Department resources, which are already stretched thin trying to implement earlier Biden student loan initiatives including the Limited PSLF Waiver, a new IDR Adjustment, a widespread default resolution initiative, and a backlog of Borrower Defense to Repayment applications. And it would mean that borrowers might have to wait a long time for relief, depending on how long the application review process takes.
For right now, there’s not much student loan borrowers can do other than wait on Biden’s decision.