On Aug 24, President Joe Biden announced he will cancel up to $10,000 in federal student loan debt for borrowers who earn less than $125,000 a year, or families earning less than $250,000. The Biden administration will also cancel up to an additional $10,000 in federal loan debt for Pell Grant recipients. Government data shows who will benefit from student debt cancelation.
As of 2022, 43 million people owe federal student loans, averaging about $36,000 per person. Without considering the income limit, about a third of all borrowers currently owe less than the $10,000 cancellation amount. Others will see a benefit from larger debt amounts decreasing. This includes women who, on average, owe larger amounts of loans than their male counterparts.
Who would benefit from student loan cancellation?
Almost one-third of federal student loan borrowers owed less than $10,000 in 2020, according to Department of Education data. The policy canceling $10,000 in student loan debt will eliminate the entirety of their debts if those borrowers make less than the income limit. Half of all borrowers owed between $10,000 and $60,000. On the other end, 7% of federal student loan borrowers owed over $100,000.
According to researchers from the Federal Reserve Bank of New York, borrowers who live in high-income neighborhoods hold 33% of federal balances while borrowers residing in low-income areas hold 23% of balances. The income gap set as part of the debt cancellation announcement would restrict how much high-income neighborhoods benefit from the change.
How do student loan debts differ by race and gender?
The median debt for Asian, Black and white women was $20,000 as of June 2020, according to the Census Bureau. For Asian men with federal student loans, their median debt owed was $25,000. It was less for Black and white men, who had median student debts of $14,000 and $18,000, respectively.
With Biden's student debt cancelation policy, the median student loan debt for both Black and white women would be cut in half, going from $20,000 to $10,000, according to the Census.
The data comes from the Census Bureau’s Survey of Income and Program Participation, which collects information on the value of student loans or education expenses owed per person. The most recent data available comes from 2020.
The median debt for Black men would decrease from $14,000 to $4,000, under such a policy. For white male borrowers the median student loan debt would decrease to $8,000, according to Census data.
The median student loan debt for Asian men would be $15,000 if the policy was enacted. The plan would have the median student debt for Asian women drop below $10,000.
How much would canceling $10,000 in student loans cost?
According to researchers from the Federal Reserve Bank of New York, forgiveness of $10,000 per person — without an income limit — would cancel a total of $321 billion of federal student loans. This would eliminate federal student loans for 11.8 million borrowers or about 31% of people with federal loans. The average borrower would receive $8,478 in student loan cancellation, according to the Federal Reserve analysis.
Biden has canceled a little over one percent of total student loans
Since the beginning of his administration, Biden has canceled $25 billion in student loans. Most recently the Biden administration has agreed to cancel $6 billion more in federal student loans as a part of a lawsuit settlement that would impact about 200,000 borrowers who claimed they were defrauded by their colleges. If the settlement is approved by the judge, the Biden administration will have canceled a total of $31 billion in student loans, nearly 2% of total federal student loans owed.
Earlier in June, Biden canceled $5.8 billion in student loans for more than 560,000 borrowers who went to the now-defunct Corinthian Colleges.
The Department of Education also paused all student loan repayment, interest, and collections through the end of 2022. This is the eighth time the education department extended a pause on payments since the COVID-19 pandemic began. The pause on payments, interest, and collections has lasted for two and a half years.
For more information on student loan debt, see USAFacts' higher education section and get the facts every week by signing up for our newsletter.
