These borrowers could benefit the most from student loan forgiveness


These borrowers could benefit the most from student loan forgiveness.

Here’s what you need to know — and what that means for your student loans.

Student loans

As millions of student borrowers await President Joe Biden’s decision on whether or not to forgive student loans, they may be wondering who will benefit most from student loan forgiveness. Yes, it’s easy to say that anyone who gets a student loan forgiveness “benefits,” whether it’s a $10,000 or $50,000 student loan forgiveness. There is also the prospect of targeted student loan cancellation, such as the announcement last week that 9 million borrowers are now eligible for student loan cancellation. However, here are 3 specific groups of student borrowers who could be the biggest winners from large-scale student loan forgiveness.

1. Borrowers earning less than $150,000

If you are a federal student borrower earning less than $150,000 a year, you may benefit the most from student loan forgiveness. Biden could set income caps, which could limit who is eligible for large-scale student loan forgiveness. The Biden administration has set potential income caps for student loan forgiveness, including up to $150,000 of income for individual borrowers. According to the student loan Data from CollegeBoard, as shared by Business Insider, here’s a breakdown of student borrowers by income (assuming a total of 45 million student borrowers):

Student Loan Debt by Income

  • $5,000 – $9,999: 17% of student borrowers
  • $10,000 – $19,999: 21% of student borrowers
  • $20,000 – $39,999: 21% of student borrowers
  • $40,000 – $59,999: 9% of student borrowers
  • $60,000 – $79,999: 6% of student borrowers
  • $80,000 – $99,999: 3% of student borrowers
  • $100,000 – $199,999: 5% of student borrowers

According to this data, more than 90% of student borrowers earn less than $100,000 per year. An additional 5% earn between $100,000 and $200,000 per year. If Biden institutes a $150,000 income cap, then the vast majority of federal student loan borrowers would qualify for student loan forgiveness.

2. Student loan borrowers with low student loan balances

If Biden cancels $10,000 in student loans for each borrower, student borrowers with low balances will benefit the most. Although each eligible borrower gets an equal amount of student loan forgiveness, the relative impact is greater for borrowers who owe less. For example, a $10,000 student loan forgiveness for a borrower with a student loan balance of $10,000 would eliminate the entire student loan balance. In contrast, a $10,000 student loan forgiveness would have a relatively lower impact on a borrower with $200,000 student loan debt.

  • Less than $5,000: 7.8 million borrowers
  • $5,000 to $10,000: 7.4 million borrowers
  • $10,000 – $20,000: 9.2 million borrowers
  • $20,000 – $40,000: 9.7 million borrowers
  • $40,000 – $60,000: 4.3 million borrowers
  • $60,000 – $80,000: 2.6 million borrowers
  • $80,000 – $100,000: 1.4 million borrowers
  • $100,000 – $200,000: 2.4 million borrowers

If Biden cancels $10,000 in student loans, then roughly 15 million student borrowers would see all of their federal student loan debt forgiven. With $50,000 in student loan forgiveness, approximately 36 million student borrowers would no longer have federal student loan debt.

3. Student Loan Borrowers with Higher Education Debt

If you have graduate student loans, you may benefit the most from canceling your student loan. Graduate student debt accounts for nearly half of all federal student loans. Thus, any comprehensive student loan forgiveness plan will help these borrowers. That said, if there is an income cap of, say, $150,000, all student borrowers with graduate student loans would not qualify. It is important to note that student borrowers with higher degrees such as a law or medical degree, for example, can earn significantly higher incomes compared to a high school or college graduate. This means that current medical students or medical residents could qualify for student loan forgiveness even if their potential future earnings are expected to be more than $150,000.

Student loans: next steps

Biden has not released any plans on large-scale student loan cancellations, nor has he confirmed that he will cancel student loans. If Biden decides to cancel student loans, all three of these types of student borrowers could benefit. However, there is no guarantee that Biden will write off $10,000 or any other amount. Biden, who has forgiven $25 billion in student loans since becoming president, said in late April he would decide on a broad student loan forgiveness within weeks. However, the president has not commented on the next steps or potential timeline for an announcement. With significant inflation and the prospect of a recession, Biden may forgo large-scale student loan forgiveness for fear it will increase inflation. That said, Biden could wait to announce a decision on student loan forgiveness later this summer before temporary student loan relief ends August 31, 2022. The end of student loan relief means that you need to prepare for the restart of student loan repayments. Here’s how to conquer your student loans and save money:

Student Loans: Related Reading

Senators propose major changes to student loan forgiveness

Department of Education Announces Major Overhaul of Student Loans Service

Navient agrees to forgive $3.5 million in student loans

How to qualify for $17 billion in student loan forgiveness


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