President Joe Biden returns to the White House from a day trip to Minneapolis on May 1, 2022.
Stefani Reynolds | AFP | Getty Images
President Joe Biden recently said that he’d be making his decision around student loan forgiveness within weeks.
That means borrowers uncertain of the future of their debt, who’ve been hearing about the possibility of debt cancellation even before the 2020 presidential primary, will likely soon finally get an answer.
But what will that be? That’s the big question.
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White House aides are currently deliberating on the shape that broad cancellation should take, according to a recent report. Some of the ideas being floated include limiting the relief to those earning less than either $125,000 or $150,000.
Here is a look at the possible impact of some of the leading proposals.
Some people are pushing student debt forgiveness to be targeted at those with income below certain levels. It remains unclear what the cap, if any, would be.
However, about two-thirds of student loan borrowers in the U.S. earn under $100,000 a year, according to an analysis by higher education expert Mark Kantrowitz.
It would cost the government around $938 billion to erase the loans for everyone under that threshold.
A third of borrowers make less than $50,000, and it would cost around $437 billion to forgive just these people’s loans.
At the moment, the main point of contention among student loan forgiveness proponents is over how much debt should be scrapped.
At a press conference last week, Biden said he wasn’t considering canceling $50,000 in student loans, which had been the amount of relief requested by many advocates and some Democrats, including Senate Majority Leader Chuck Schumer of New York.
Still, the president, who had previously expressed reluctance to canceling any student debt without Congress, now appears poised to do so. Advocates will be heavily lobbying the White House in coming weeks to forgive more, rather than less, student debt.
Cancelling $50,000 for all would cost around $900 billion, and leave 80% of current federal student loan holders with no balance, according to a recent study by The Federal Reserve Bank of New York.
If Biden remains uninterested in moving ahead with that larger amount of forgiveness, it’s unclear what number he might settle on. On the campaign trail, he came out in support of removing $10,000 from people’s balances.
That would wipe out $321 billion of federal student loans, and eliminate the entire balance for nearly 12 million people.
Around 70% of student loan borrowers, however, would still be left with debt.