According to research from the New York Fed, the total outstanding balance of student loan debt in the United States stands at $1.58 trillion. This is as of the end of the third quarter of 2021 and represents an increase of $14 billion from 2020. According to a 2018 report from Experian, there are a staggering 44 million student loan borrowers in the U.S. The election in 2020 was divisive on several issues. A commonly held belief was that Joe Biden and Student Loan Forgiveness went hand in hand. This was in large part due to the fact that the Democratic Party’s history. Specifically this party has tended to be more supportive of programs that reduce or eliminate student debt.

Biden and Student Loan Forgiveness: The Origin

Of the many promises that President Joe Biden made on the campaign trail, one promise targeted young voters in particular. This was his pledge to cancel a portion of student loans per borrower in the country. If you are wondering why this is so significant, take a look at the below chart.

chart showing debt composition by age

The chart shows the composition of debt broken down by age group. Student loans make up a disproportionately large amount of the debt of people aged 18 to 39. This shouldn’t be surprising as younger people have by definition worked for a shorter period of time. But it should give you an idea why Joe Biden pursued a strategy of connecting himself with this issue.

Biden and Student Loan Forgiveness: The Plan

As a Presidential Candidate, Joe Biden’s student loan forgiveness pledge was part of his “Emergency Action Plan”. The plan was to cancel $10,000 of student debt per borrower. This was originally proposed by Senator Elizabeth Warren. A direct quote from the Biden campaign was that “young people and other student debt holders bore the brunt of the last crisis”. His belief was that because of this history, “it shouldn’t happen again”. Canceling $10,000 of debt would help ease the burden that over 40 million American borrowers. The amount itself would represent a reduction in debt of over 30% for many borrowers.

Biden and Student Loan Forgiveness: The Reality

However, almost a year into President Biden’s term the Biden and Student Loan Forgiveness hopes have thus far disappointed. Few people have seen much change with their student loan situations. To be fair, the Biden Administration hasn’t been sitting on their hands. For example, they extended the student loan payment freeze until January 2022 in August 2021. Also in August they provided $5.8 billion in automatic student loan discharges. This payment was to borrowers with a total and permanent disability and accounted for 323,000 borrowers. However, a full scale student loan forgiveness plan has yet to be launched.

Introduction to Student Loan Forgiveness

In addition to providing a student loan forgiveness update we also provide an overview of student loan forgiveness. Our hope is that you walk away with a good understanding of this topic, what progress has been to date and what the future of student loan forgiveness. Student loan forgiveness is not a new concept. In fact lenders have offered forgiveness programs for many years. When your student loan is forgiven, you’re no longer obligated to make repayments to your lender. Typically, student loan forgiveness occurs for people who are unable to make their repayments because of their financial situation. The common approach is to apply for student loan forgiveness if you believe you meet certain eligibility criteria.

President Obama’s Approach to Student Loan Forgiveness

President Obama had a student loan forgiveness program called the Obama Student Loan Forgiveness Program. This program was created in 2007 and the basic construct was to offer forgiveness for some outstanding federal student loans after 25 years. In cases where a person had student loans related to their public service work, under the Obama program they could be forgiven after 10 years.

Biden’s Approach to Student Loan Forgiveness

Biden’s pledge aims to do much more than forgive the occasional student loan. Biden’s push towards $10,000 of student loan forgiveness per borrower is unique because of how widespread the action would be. However the Biden administration successfully passing pieces of legislation like the American Rescue Plan, there has been little progress on student loan forgiveness.

Expanded Eligibility

In October 2021, the Biden administration announced changes to the student loan forgiveness program. The intended purpose of these changes is that more people will become eligible for student loan forgiveness. In particular, these changes are focused on providing access to public sector workers. For example, it includes workers that are members of the military, who are seeking relief from their debts. The new proposals will likely affect approximately 550,000 borrowers, providing each with an extra two years of progress towards making their full repayments. In a public statement U.S. Secretary of Education Miguel Cardona said:

“Teachers, nurses, first responders, service members, and so many public service workers have had our back especially amid the challenges of the pandemic. The system has not delivered on that promise to date, but that is about to change for many borrowers who have served their communities and their country.”

The proposals take the form of an overhaul of the Public Loan Forgiveness Program. And the intent is to make applying much easier than before. It is believed that streamlining the application process will lead to more people getting loan forgiveness than in the past. It also makes allowances for some 22,000 borrowers who have consolidated loans and another 27,000 that may qualify for forgiveness based on their work history.

Biden and Student Loan Forgiveness: Some Challenges

When it comes to Biden and student loan forgiveness, a significant barrier to his plan stems from the political climate. This isn’t just a Democrat vs. Republican issue. Within President Biden’s party there are disagreements. These disagreements center on how much student loan should be forgiven. With every student loan forgiveness update, Biden has been firm on his $10,000 per borrower figure. However, many prominent Democrats are pushing for an even greater amount than this. For example, U.S. Representative Alexandria Ocasio-Cortez, Senator Elizabeth Warren, and Senate Majority Leader Chuck Schumer have all called for the forgiveness number to rise to $50,000 per person. Biden disagrees with this figure likely due to the implied total cost. The fact that Democrats can’t agree on such an important detail is a notable challenge. Unless this changes you can expect continued delays on the implementation of this plan.

There Have Been $11.5 Billion in Student Loans Forgiven To Date

According to the Department of Education, a collection of initiatives have resulted in the forgiveness of $11.5 billion in debt so far. This figure consists of loans held by approximately 600,000 people. While this is a very small fraction of the over 40 million student loan borrowers, in aggregate it is still notable progress. In many cases, the borrowers haven’t needed to take any action, with the forgiveness being automatically applied to their student loan accounts. However, some have found that they do need to take action. For example, those making claims under the Borrower Defense to Repayment scheme typically find they receive their money automatically once their applications are approved. Similarly, those eligible for relief due to school closures will find that they receive payments automatically. That said, those who may wish to claim relief under the Public Loan Forgiveness Program mentioned earlier may find that they have to do a little more work to claim their money.

Slow-Moving Forgiveness

With this student loan forgiveness update, we see that the Biden administration has made some progress towards fulfilling its pledge to provide every student loan borrower with $10,000 of relief. However, the work is slow, with disagreements within the democratic party, coupled with immense amounts of paperwork. The below summarizes some helpful facts about Biden and student loan forgiveness so far in his administration.

table showing facts on biden and student loan forgiveness

According to data from the Education Data Initiative, up to 43% of applications for student loan forgiveness have yet to be processed. There are just simply too many signs that suggest that progress so far has just been slow. The vast majority of people have not seen any sign of the student loan forgiveness pledged to them during the 11 months that Joe Biden has been in office. What happens in the coming years will be interesting and we are hopeful that more progress is made. Either way, you can be confident that we will be on top of any new developments in this area!