On the campaign trail, Pres. Joe Biden endorsed canceling $10,000 in federal student loan debt through legislation. Since taking office, his administration has held off on blanket cancelation and instead focused on fixing existing forgiveness programs.
Will President Joe Biden forgive $10,000 in student loans? One year into his administration, that answer is no. Mr. Biden has resisted pressure from Democratic lawmakers to use executive action to forgive $10,000 per person holding federal student loan debt. Whether he has the authority to do so is debatable — even after the long-promised report from the Education Department was made public.
Ahead, learn whether $10,000 student loan forgiveness is likely.
Likelihood of student debt cancellation
The truth is that student loan forgiveness of any kind — $10,000 or $50,000 — is unlikely. Progressive, democratic lawmakers like Chuck Schumer of New York and Elizabeth Warren of Massachusetts continue to push for cancellation. But Mr. Biden continues to avoid those ambitious calls. He and members of his inner circle believe that widespread student relief is not popular with many Americans, according to Politico.
What’s more, republican lawmakers have called the demand to forgive student debt “incredibly, fundamentally unfair,” and “an affront to the millions of borrowers who responsibly repaid their loan balances.” In their minds, the law is clear: “The Department does not have the legal authority to cancel student loan debt en masse.”
Given this division, it’s unlikely we’ll be getting any update on student loan cancellation before payments resume May 1, 2022.
Learn More: Student Loans Forgiven After 20 Years
“I hope President Biden will resist Democrats’ calls to put taxpayers on the hook for billions of dollars in student loans.” Sen. John Thune, R-S.D.
When will student loans be forgiven?
Here’s the deal, it’s unlikely the Biden Administration, even with control of both houses, has the votes to push broad student debt cancellation through Congress. Quite simply, the political will is lacking. That may change as the pandemic persists, mid-term elections near, and races tighten. But seeing as how it hasn’t happened yet, my opinion as a student loan lawyer is that the calls to cancel student debt for all borrowers won’t be headed by the federal government before the payment pause ends.
Instead, we'll likely see the Biden Administration continue to chip away at the extensive education debt problem by fixing existing student loan relief programs.
Since taking office, Mr. Biden and education secretary Miguel Cardona have doled out over $12 billion in loan forgiveness to:
- Borrowers who were defrauded by failed for-profit schools. (Borrower Defense to Repayment.)
- Soldiers deployed to war zones.
- Permanently disabled people. (Total and Permanent Disability Discharge.)
- Full-time government and nonprofit employees who were screwed over by the broken Public Service Loan Forgiveness Program. (PSLF Waiver.)
The next forgiveness program targeted for improvement could be income-driven repayment plans. All federal student loan borrowers who participate in an income-based repayment plan can wipe out their entire loan balance after making at least 20 years’ worth of monthly payments. Although this type of debt forgiveness isn’t immediate, it’s an option for borrowers with little chance to pay back their loans.
Fixing IDR forgiveness will likely involve simplifying existing repayment plans and improving tracking of federal student loan payments — especially as millions of borrowers switch loan servicers.
Learn More: Do I Qualify for Student Loan Forgiveness?
“The student debt crisis is a racial and economic justice issue, and we must finally begin to address it as such.” Rep. Ayanna Pressley, D-Mass.
How to get the $10,000 student loan forgiveness
Even though I believe that $10,000 student loan forgiveness is unlikely, the question remains how to get it if it does happen.
Based on how debt relief has worked so far under Donald Trump and Mr. Biden, it’s likely that to get student loan forgiveness, you’ll need to:
- Have student loans owned by the U.S. Department of Education.
- Be out of default and in good standing.
Each time the covid-19 forbearance has been extended by executive order, the relief has been targeted toward borrowers with department-held federal student loans (Direct Loans). People with private student loans, Perkins Loans, and some Federal Family Education Loans had to keep making student loan payments throughout the pandemic.
If what’s happened in the past remains true in the future, then any broad student loan forgiveness from the White House will be similarly limited.
To increase your chance of being included in the cancellation of any amount, consider combining your FFELP and Perkins Loans into a Direct Consolidation Loan. You can consolidate for free at studentaid.gov.
Learn More: How to Consolidate Student Loans
Cost to forgive all student loans
Widespread student loan debt forgiveness would be more than what the nation has spent on unemployment insurance over the past 20 years. It would be larger than the amount spent on Earned Income Tax Credit. And it would be greater than the amount the government has spent on food stamps.
Here’s the cost to forgive federal student loan debt by amount:
- Forgiving 100% would cost $1.6 trillion.
- Forgiving $50,000 would cost $1 trillion.
- Forgiving $10,000 would cost $373 billion.
Who would benefit most from across-the-board relief? Surprisingly, it would be higher income, better educated, and more likely to be white borrowers, according to the Brookings Institute.
Learn More: Update on Student Loan Payment Pause
The Bottom Line
It's unlikely Mr. Biden will fulfill his campaign promise to forgive $10,000 in federal education debt before student loan repayment starts back in May. His administration has already dropped free community college. Plus, blanket cancelation doesn't solve the true problem: the rising cost of higher education.
If you want help developing a strategy to deal with your student loans, I’m here to help. My entire law practice is dedicated to helping borrowers with federal and private loans.
Schedule a free 10-minute call with me today. We’ll work together to develop a plan that allows you to meet your future goals.