Federal Student Loan Debt Cancellation

(NerdWallet) – Summer “will, won’t he” student debt cancellation is upon us.

The “he” is, of course, President Joe Biden.

Some 43 million borrowers cling to hope that Biden will take executive action to alleviate at least some of their collective $1.7 trillion debt.

Rumors are swirling on social media. The Ministry of Education says it will be ready whenever a cancellation occurs. And the White House leaked potential details to the press.

“It comes up all day, every day from borrowers,” says Betsy Mayotte, president and founder of the nonprofit Institute of Student Loan Counselors. “They’re frustrated with messaging.”

So what is Biden waiting for?

What has happened so far

President Biden campaigned on the promise of student debt relief, but his commitment to delivering it wavered once he took office.

Biden initially asked Congress to send him student debt relief legislation — rather than act on his own — despite the likelihood that such a proposal would pass with a narrow Democratic majority. But in doing so, he raised questions about his legal authority to take executive action to cancel the debt. Additionally, he said he would not support debt forgiveness for Ivy League borrowers.

It seemed that debt cancellation could remain a pipe dream for borrowers and activists.

But in recent months, Biden’s earlier public resistance to canceling student debt by decree has waned. Most hints from the White House lately have been about timing and logistics rather than the legal mechanism.

So will he? Most observers say yes. The real questions now are when, how much and how many will benefit?


There are signs that borrowers could see a cancellation announcement as early as this summer.

Persis Yu, director of policy and general counsel at the Student Borrower Protection Center, a nonprofit advocacy organization, says she thinks an announcement is likely before the federal payments pause ends after Aug. 31. .

“We need to see action before this happens so that we don’t have more borrowers repaying loans they no longer owe,” Yu says. “I hope the White House takes the time to s make sure she’s doing things right.”

The White House is clearly in no rush.

On April 28, Biden told reporters he would have an answer on canceling student debt “in a few weeks.” On May 3, Jen Psaki, a former White House press secretary, said Biden was considering tying the relief to the borrower’s income level. It looked like an announcement was imminent.

Then nothing happened.

The Washington Post reported on May 27 that Biden had hoped to announce the cancellation during the University of Delaware start the following day, but chose not to in light of the elementary school shooting in Uvalde, Aus. Texas earlier this week.

On June 6, a leak from the White House to the Wall Street Journal pushed expectations back to July or August. That would bring an announcement closer to the planned restart of federal student loans on September 1.

How many?

During his 2020 campaign, Biden promised to forgive $10,000 in federal student loans. Once he became president, the $10,000 figure stuck, despite calls from some Democratic lawmakers to rescind $50,000. Biden has consistently pushed that higher figure throughout his presidency.

Recent White House leaks to the press suggest $10,000 is the number borrowers can expect.

How many will benefit?

The $10,000 write-off would likely wipe the slate clean for 15.2 million potential borrowers, according to federal data. For another 30.5 million, a $10,000 write-off would bring them closer to paying off their debt, as long as the interest doesn’t accrue faster than they can repay.

The White House told the Washington Post in a May 27 article that it was debating limiting cancellation to borrowers who earned less than $150,000 in the previous year or less than $300,000 for borrowers who filed jointly. .

Income limits make cancellation difficult. Borrowers should consent to the Internal Revenue Service sharing their income information with the Department of Education. Otherwise, the education department will not have access to it. This barrier to entry means that borrowers could miss cancellation even if they are eligible.

“I understand why they talk about resource testing, because that eliminates some political arguments,” says Mayotte. “But that means borrowers will have to take action.”

What stands in the way?

Several moving parts can influence Biden’s decision to cancel the debt (or not):

  • Federal student loan payment break set to end Aug. 31; economists say many borrowers are unprepared and another extension is possible, if not likely.
  • Midterm elections in November – and the reckoning around political backsliding.
  • An aggressive rise in inflation, which recently prompted the Federal Reserve to announce the biggest interest rate hike in decades.
  • Potential legal challenges to any cancellation. But it’s hard to say whether that could have an impact on delivery to borrowers. Yu, a lawyer, says she believes Biden has the legal power to cancel the debt.
  • If the Department of Education and Student Loans Services have the resources to undertake a cancellation request process.

Biden has already canceled some debts

It should be noted that the Biden administration has already forgiven more student loan debt than any other presidential administration via targeted forgiveness programs: About 1.3 million borrowers have already received about $25 billion in debt forgiveness.


  • $6.8 billion for more than 113,000 public servants through a limited waiver of the public service loan forgiveness that expires Oct. 31.
  • $8.5 billion for more than 400,000 borrowers with total and permanent disabilities.
  • $7.9 billion for 690,000 borrowers whose institutions cheated them or shut them down before they could graduate.

What Borrowers Can Do While Waiting

Unless you have $10,000 or less in student debt, you should always think about what you will do when payments resume. Use the time while you wait for make a plan, which means contacting your repairer now for refund options. Cancellation is unlikely to change the amount you will pay each month.

If you work for a public service employer, now is also a good time to apply for the PSLF waiver, which would count previously ineligible payments into the 120 needed for cancellation.

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