President Joe Biden said Thursday that he is considering a federal student loan debt forgiveness program aimed at helping 41 million borrowers get rid of $1.7 trillion in debt.
While members of his own party are lobbying Biden to forgive $50,000 per person in student loan debt, the president has indicated that he favors forgiving $10,000 in debt per person.
While collecting federal student loan payments has been suspended because of the pandemic, the payments are set to be reinstated after Aug. 31.
Biden said he would decide whether those payments will be due in the next couple of weeks.
What is Biden considering, what do others want and how much will it cost? Here’s what we know now.
What has Biden said he would do?
On Thursday, Biden said he would consider some sort of student loan forgiveness, but not the large amount some want.
“I am considering dealing with some debt reduction. I am not considering $50,000 debt reduction,” Biden said at the White House after unveiling new funding for Ukraine. “But I’m in the process of taking a hard look at whether or not there are going — there will be additional debt forgiveness, and I’ll have an answer on that in the next couple of weeks.”
Biden has signaled he is more comfortable with debt cancellation in the range of $10,000, and previously supported legislation to forgive $10,000 in student debt per borrower.
Biden is also said to be considering some sort of means testing for any student loan relief, White House press secretary Jen Psaki told reporters on Thursday.
“He has talked in the past about how, you know, he doesn’t believe millionaires and billionaires, obviously, should benefit, so that’s certainly something he would be looking at,” she said.
What do others want?
Some Democrats are pushing for loan forgiveness of up to $50,000.
Sen. Elizabeth Warren, D-Massachusetts, supports forgiving student loans of up to $50,000 per borrower in federal student debt.
Senate Majority Leader Chuck Schumer, D-New York, who also supports a $50,000 loan reduction program, repeatedly called on Biden to take executive action to cancel student loan debt.
According to Schumer, Biden was “moving in our direction” and “getting closer” to eliminating $50,000 in debt.
But most Republicans in Congress are not for forgiving student loan debt.
Sen. Mitt Romney, R-Utah, likened canceling the debt to a bribe. “Desperate polls call for desperate measures,” he said in a tweet.
“Desperate polls call for desperate measures: Dems consider forgiving trillions in student loans. Other bribe suggestions: Forgive auto loans? Forgive credit card debt? Forgive mortgages? And put a wealth tax on the super-rich to pay for it all. What could possibly go wrong?”
Sen. Susan Collins, R-Maine, on Thursday also criticized the potential Biden plan, arguing that any debt relief would be unfair to people who paid it back.
“I have a lot of concerns that there does not seem to be any kind of income cap that he is proposing,” Collins told Insider.
“I believe that we ought to increase Pell Grants which go to our neediest families and that is a far better way to target relief,” she said, referring to a program that helps lower-income students pay for higher education.
What will it cost?
Canceling loan debt will cost billions of dollars in loans and potential interest.
According to Liberty Street Economics, the total outstanding balance for federally-owned (including defaulted) student loans in December 2021 was $1.38 trillion.
If Biden should choose to forgive a maximum of $50,000 per borrower, the cost would be $904 billion and would forgive the full balance for 29.9 million of the 37.9 million federal borrowers.
If $50,000 worth of debt is forgiven, that would mean that 77% of all federal student loans that were delinquent or in default prior to the pandemic would be forgiven.
If Biden should choose to forgive $10,000 in student debt, the plan would forgive $321 billion in federal student loans, eliminating the total student loan debt of $11.8 million per borrower. It would cancel 30.5% of loans delinquent or in default prior to the pandemic.
If Biden should impose an income limit of $75,000 for debt elimination, the total cost of a $50,000 forgiveness policy would be $507 billion.
For a $10,000 forgiveness policy, the cost would be $182 billion.
Will it pass Congress?
As it stands now, there is little support from Republicans for student debt forgiveness as it is being proposed.
In addition, many progressive Democrats think the $10,000 plan Biden seems to favor does not go far enough.
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