President Joe Biden and his Student Loan Forgiveness Plan

According to persons familiar with the situation, the White House is considering canceling at least $10,000 in student debt per borrower by executive action, with momentum growing as President Joe Biden finds ways to boost national support ahead of the November midterm elections.

The action would be fraught with danger. Some are concerned that it will exacerbate inflation, which is already weighing severely on the Democrats' chances of keeping control of the House and Senate.

However, any action may fall short of satisfying progressives and other supporters.

Since President Joe Biden vowed to forgive $10,000 per borrower on the campaign trail, federal student loan debtors have been wondering about debt cancellation.

Can student loan debt be forgiven in its entirety? Should it be?

Forbearance on federal student loans expires on August 31. In the midst of the pandemic, most debtors will not have made a payment for over two years. Loan forgiveness has been offered to some borrowers.

When payments resume, however, most federal student loan debtors will make monthly payments on the same remaining balance as before the outbreak.

The Department of Education reports that over $18.5 billion in loans have been terminated for more than 725,000 debtors since Biden took office. However, that only applies to existing forgiveness schemes.

While Biden has expressed support for comprehensive student loan forgiveness, he has yet to present a particular proposal or figure since becoming president. Biden might urge Congress to adopt a measure canceling debt, or he could exercise executive authority pending legal determination.

As the debate over student loan forgiveness persists, debtors should plan on their loans not being forgiven entirely. Though it'll be a pleasant surprise if it happens.

Biden's position on student debt forgiveness

Biden has been pushed by members of Congress to eliminate $50,000 in debt per borrower. However, the president has stated that if he uses his ability to erase large amounts of debt, it will not exceed $10,000 per borrower.

At a media briefing on April 28, he stated “I am considering dealing with some debt reduction; I am not considering $50,000 in debt reduction. But I'm in the process of taking a hard look of whether or not there will be additional debt forgiveness, and I'll have an answer on that in the next couple of weeks.”

Broad student loan forgiveness was not included in Biden's budget proposal for 2022. During his presidential campaign, he suggested forgiveness in the following situations:

  • If your annual income is less than $125,000. The phaseout of this benefit was mentioned in Biden's plan, but no further specifics were provided.

  • If you went to a public university or college. Private historically Black colleges and universities, as well as other minority-serving institutions, would be eligible as well.

  • If you used the loans to pay for college.

There is no information regarding which loans might be canceled because there is no official forgiveness proposition.

Arguments in favor of student debt forgiveness

Borrowers have had to postpone their lives due to student debt. According to proponents of debt cancellation, student debt is inhibiting borrowers from making big financial decisions, such as entrepreneurship and buying homes, as well as starting a family with children. 

Not all borrowers have advanced degrees that increase their earning potential. According to Brookings, persons with debt and no degree are four times more likely to default than those with a degree.

Data from the  National Center for Education Statistics revealed that 41.8 percent of students who started college in 2011-12 took out student loans.

Only 59 percent had completed their bachelor's degree six years later. Borrowers without a degree are not eligible for the higher lifetime earnings that are associated with college completion.

The cancellation of student debt could help address the racial wealth divide. Data demonstrates that a lack of family wealth causes many Black and Hispanic families to rely more heavily on student loans to pay for education.

After graduation, injustices persist as Black and Hispanic graduates earn less than other graduates, making them more likely to default on their loans.

Arguments against student debt cancellation

The cancellation of student debt is intrinsically unjust. Critics claim that student debt cancellation would not assist individuals who did not attend college or who had previously paid off their student loans.

Critics contend that canceling the program will help only the 13 percent of the population who attend college and that it is unneeded because people with college degrees earn more.

Student debt forgiveness on a large scale is regressive. According to a Brookings Institution research published in January 2022, the cancellation would end up benefiting rich student loan debtors, who are more likely to have attended graduate school. Higher incomes are usually associated with advanced degrees.

A one-time cancellation will not fix the student debt crisis of the future. According to projections from the Committee for a Responsible Federal Budget, a right-center public policy organization, if all student debt were removed, overall debt would revert to current levels by 2035.

Total debt would increase to current levels by 2025 if $10,000 in debt per borrower was erased.

Is Biden going to eliminate student loans?

Since becoming president, Biden has canceled billions of dollars in student debt.

Will Biden eliminate all borrowers' student loans?

President Joe Biden is unlikely to erase everyone's student loans. Biden will also likely refuse to forgive most student loan debt. Expect constraints on student loan forgiveness if Biden passes sweeping student loan forgiveness legislation.

Biden, for example, may set an income limit of $125,000, $75,000, or any other figure.

Biden might also restrict student loan forgiveness to only federal and college student loans. Graduate school student loans and private loans may be excluded if this occurs.

President Joe Biden is expected to announce historic student loan forgiveness for millions of borrowers in the coming weeks.

Although there is no assurance that Biden will pursue a large-scale student loan forgiveness program, he could opt to cancel up to $10,000 in student loans for millions of borrowers.

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