Student Loan Forgiveness: Here Are the Potential Big Winners – Forbes | Vette Leader

These borrowers could benefit the most from student loan forgiveness.

Here’s what you need to know – and what it means for your student loans.

student loans

As millions of student loan borrowers await President Joe Biden’s decision on foreclosure on student loans, they may be wondering who will benefit most from student loan forgiveness. Yes, it’s easy to say that everyone who gets a student loan forgiveness has “benefits,” whether it’s $10,000 or $50,000 of student loan cancellation. There is also the prospect of targeted student loan cancellations, such as the announcement last week that 9 million borrowers now qualify for student loan forgiveness. However, here are 3 specific groups of student loan borrowers who could be the biggest winners of a large-scale student loan foreclosure.


1. Borrowers earning less than $150,000

If you’re a federal student loan borrower making less than $150,000 annually, you could benefit the most from student loan foreclosure. Biden could impose income caps that could limit who qualifies for large-scale student loan foreclosures. The Biden administration has established potential income caps for student loan forgiveness, including income of up to $150,000 for individual student loan borrowers. According to CollegeBoard student loan data shared by Business Insider, here is a snapshot of student loan borrowers by income (assuming a total of 45 million student loan borrowers):

Student loan debt by income

  • <$5,000: 16% of student loan borrowers
  • $5,000-$9,999: 17% of student loan borrowers
  • $10,000-$19,999: 21% of student loan borrowers
  • $20,000 – $39,999: 21% of student loan borrowers
  • $40,000 – $59,999: 9% of student loan borrowers
  • $60,000 – $79,999: 6% of student loan borrowers
  • $80,000 – $99,999: 3% of student loan borrowers
  • $100,000 – $199,999: 5% of student loan borrowers

Based on this data, more than 90% of student loan borrowers make less than $100,000 per year. Another 5% earn between $100,000 and $200,000 annually. If Biden implements a $150,000 income cap, 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, low-balance student loans will benefit the most. While each eligible borrower would receive the same amount of student loan cancellation, the relative impact is more significant for borrowers who have less debt. For example, a $10,000 student loan forgiveness for a borrower with a $10,000 student loan balance would eliminate the entire student loan balance. In contrast, canceling a $10,000 student loan would have a relatively smaller impact on a borrower with $200,000 in student loan debt.

  • Less than $5,000: 7.8 million borrowers
  • $5,000-$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 canceled $10,000 in student loans, about 15 million student loan borrowers would have all of their federal student loan debt forgiven. With $50,000 in student loan forgiveness, approximately 36 million student borrowers would be out of federal debt.


3. Student loan borrowers with student debt

If you have student loans from grad school, you could benefit the most from student loan cancellation. Graduate student loan debt accounts for nearly half of all federal student loans. Therefore, any comprehensive student loan forgiveness plan will help these borrowers. That is, if there is a $150,000 income cap, for example, not all student borrowers with graduate student loans would qualify. Importantly, student loan borrowers with advanced degrees, such as a law or medical degree, can earn significantly higher incomes compared to a high school or college graduate. This means that current medical students or medical professionals may qualify for student loan forgiveness even if their future potential income is projected to exceed $150,000.


Student loans: next steps

Biden has not released a plan for large-scale student loan forgiveness, nor has he confirmed that he will cancel student loans. If Biden decides to call in student loans, these three types of borrowers could benefit. However, there is no guarantee that Biden will cancel $10,000 or any other amount. Biden, who has forgone $25 billion in student loans since taking office, said in late April he would decide on a sweeping student loan forgiveness within weeks. However, the president has not commented on the next steps or the possible timing for an announcement since then. With significant inflation and the prospect of a recession, Biden might refrain from large-scale student loan foreclosures for fear it could increase inflation. However, Biden may wait to announce a decision on student loan forgiveness later this summer before temporary student loan relief ends on Aug. 31, 2022. The end of student loan relief means you should prepare for the resumption of student loan payments. How to conquer your student loans and save money:


Student Loans: Related Reading

Senators propose major changes to student loan forgiveness

The Department of Education announces a major overhaul of student loan administration

Navient agrees to foreclose $3.5 million in student loans

How to qualify for $17 billion in student loan forgiveness

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