New Details: Student Loan Forgiveness Could Wipe Out The Debt Of Most Borrowers

New information disclosed by the U.S. Department of Education provides crucial new details on the impact that mass student loan forgiveness could have on millions of Americans.

The data, requested and released by Senator Elizabeth Warren (D-MA) this week, sheds light on how consequential broad student debt cancellation would be, depending on the amount. The data shows how many people would have their student debt balances completely eliminated through mass cancellation.

At $10,000 in student loan forgiveness, over 15 million student loan borrowers would become debt-free. At $20,000 in student loan forgiveness, over 24 million borrowers would be debt free. And at $50,000, over 36 million.

Borrowers in default on their student loans would also benefit enormously. Between 4.5 and 9.8 million borrowers in default on their federal student loans would have their debt burdens completely eliminated, depending on how much student loan debt is forgiven between $10,000 and $50,000.

Whether there will be any mass cancellation of student debt remains to be seen. Student loan borrower advocates and progressives continue to press Biden to enact widespread student loan forgiveness of up to $50,000 or more through executive action. Biden has been resistant to using executive action, suggesting he may not have legal authority to act, and he has expressed some opposition to higher amounts of student loan forgiveness.

But the administration is considering its options. Last week, the Biden administration announced that attorneys under Education Secretary Miguel Cardona will be exploring potential legal authorities that could be the basis for widespread student loan forgiveness implemented through executive action. The Department of Education will coordinate its efforts with the U.S. Department of Justice, which is also reviewing possible legal avenues for student loan forgiveness using executive authority. It could be weeks or months before a decision is made.

In the meantime, most federal student loan payments, interest, and collections efforts have been temporarily suspended under the CARES Act, which President Biden extended until September 30, 2021 through executive order. The new data released by Senator Warren’s office shows that the suspension of interest costs approximately $5 billion per month. Over the course of the full 18 month moratorium, which began in March 2020, this would effectively be $90 billion in student loan interest cancellation. Warren and others have argued that this effectively shows that the President does, in fact, have the legal authority to cancel student debt, since it is authority that has already been exercised by both President Trump and President Biden.

Opponents of widespread student loan forgiveness have argued that existing programs such as income-driven repayment and Public Service Loan Forgiveness (PSLF) are better avenues for providing debt relief to student loan borrowers. But Senator Warren and other advocates have argued that these programs have been plagued by problems. Public Service Loan Forgiveness in particular has had a notorious 98% rejection rate. And the data released by Senator Warren’s office this week shows that less than 7,000 student loan borrowers — out of over 40 million — have received any student loan forgiveness through these programs since March 2020.

Advocates for student loan borrowers continue to press the Biden administration to cancel student debt. Advocacy organizations including the NAACP, NextGen America, Center for Responsible Lending, Generation Progress, and Young Invincibles will be holding a town hall event today to maintain the pressure campaign. Senate Majority Leader Chuck Schumer (D-NY), who has been a recent proponent of widespread student loan forgiveness, is expected to attend the town hall.

“Too many Americans of all ages are suffering under the weight of crushing student loan debt,” said NextGen America Executive Director Cristina Tzintzún Ramirez in a statement. “This burden is felt especially deeply by Black and brown Americans, and it’s long past time for us to act. By sharing our stories and hearing from experts on the issue, we can make progress in convincing the Biden administration and elected officials to cancel student debt.” 

Further Reading

Biden Excludes Student Loan Forgiveness From Budget Proposal, But Calls For More Funding For Higher Ed: Key Details

Key Moments From Elizabeth Warren’s Blockbuster Hearing On Student Loans

4 Key Questions About Biden’s Student Loan Forgiveness Review

Biden To Initiate Additional Student Loan Relief This Week — But Borrowers Demand Full Cancellation

72,000 Borrowers Will Get $1 Billion In Student Loan Forgiveness – Do You Qualify?

Is $10,000 In Student Loan Forgiveness Next, After Biden Administration Cancels $1 Billion?

Senate Passes Stimulus Bill With Student Loan Tax Relief — Will It “Pave The Way” To Cancel Student Debt?

Here’s Everyone Who Wants Biden To Cancel Student Loan Debt (It’s A Big List)

Whether Biden Cancels Student Debt Will Depend On These 3 Things

Could These Student Loan Borrowers Be Excluded From Biden’s Forgiveness?