Student Loan Forgiveness: Biden Could Eliminate This Much Debt
Student loan forgiveness would eliminate this much student debt.
Here’s what you need to know — and what it means for your student loans.
President Joe Biden could decide the future of student loan forgiveness within weeks. That said, the White House has denied that Biden has decided to cancel $10,000 of student loans for borrowers. While Biden has said he will announce his decision soon, there’s no clear indication of how much student loan debt Biden will cancel or if he will enact any wide-scale student loan cancellation. If Biden cancels more student debt, this is how much could be eliminated.
1. Biden cancels $10,000 of student loans
If Biden enacts wide-scale student loan cancellation, expect $10,000 of student loan forgiveness. Why? This is the amount of student debt that Biden consistently has referenced since he ran for president in 2020. While Biden consistently called on Congress to pass legislation to cancel student loans, the U.S. Senate hasn’t even held a vote on wide-scale student loan forgiveness. According to the Federal Reserve, $10,000 of student loan forgiveness would:
- forgive a total of $321 billion of federal student loans;
- eliminate the entire balance for 11.8 million borrowers;
- cancel 30.5% of student loans in student loan delinquency or student loan default before the Covid-19 student loan payment pause; and
- the average student loan borrower would receive $8,478 in student loan forgiveness.
2. Biden cancels $50,000 of student loans
Alternatively, Biden could offer a summer surprise and cancel $50,000 of student loans for borrowers. Biden has never supported $50,000 of student loan cancellation, despite support from Sen. Elizabeth Warren (D-MA) and Senate Majority Leader Chuck Schumer (D-NY). That said, progressive Democrats in Congress are making a renewed push for Biden to cancel $50,000 of student loans. According to the Federal Reserve, $50,000 of student loan forgiveness would:
- forgive a total of $904 billion of federal student loans;
- eliminate the entire federal student loan balance for 29.9 million borrowers;
- cancel 77% of student loans in student loan delinquency or student loan default before the Covid-19 student loan payment pause; and
- the average student loan borrower would receive $23,856 in student loan forgiveness.
(The U.S. Department of Education has estimated that $50,000 of student loan cancellation would eliminate the entire federal student loan balance for 36 million student loan borrowers, which is more than the Federal Reserve estimated).
3. Biden cancels more student loan debt
Biden, who has canceled $25 billion of student loans, could choose an amount other than $10,000 or $50,000 of student loan debt. That said, he’s unlikely to cancel all student loans, which would cost $1.7 trillion, as Sen. Bernie Sanders (I-VT) proposed. The Biden administration also has floated income caps of $150,000 per borrower, which could limit who qualifies for student loan forgiveness. Biden could adjust this potential income cap upward or downward, or as some supporters have urged, or eliminate an income cap so that all federal student loan borrowers qualify for student loan forgiveness.
Student loans: next steps
Biden hasn’t released any formal plan on wide-scale student loan forgiveness. So, there is no guarantee of how much student loan forgiveness to expect. That said, $10,000 could be considered a base case scenario. Critics say wide-scale student loan forgiveness is a terrible idea for at least five reasons. For example, with high inflation and the threat of a recession, Biden could skip wide-scale student loan cancellation if voters think it could increase inflation. Temporary student loan relief ends on August 31, 2022, and Biden may wait until then to announce his decision on student loan forgiveness. With student loan relief ending soon, now is the time to evaluate all your options to pay off student loans. Here are some popular ways to pay off student loans faster:
- Student loan refinancing (lower interest rate + lower payment)
- Income-driven repayment (lower payment)
- Student loan forgiveness (federal student loans)