On Student Loan Forgiveness, Joe Biden Has Three Options

With just over 6 months to crucial midterm elections President Joe Biden is mulling forgiving some student loan debt, following more than a year of pressure from Democrats to act.

The Biden administration is reportedly nearing a final decision on student loan forgiveness but no announcement has yet been made, with some senior members of the president's party pushing for a more extensive forgiveness program than Biden has appeared willing to accept.

There have also been questions about the president's ability to cancel larger amounts of debt through executive action. Biden has personally questioned whether he has the power to cancel $50,000 of student per borrower, as some have urged him to do.

There are around 45 million student borrowers in the U.S. holding about $1.6 trillion in outstanding federal student loan debt.

The president appears to have three options at the moment.

No Debt Forgiveness

Biden could simply decide not to forgive any further student loan debt and leave borrowers in the same position as they currently are. This course seems unlikely, however, as the administration has already canceled more than $17 billion in student loans since coming to office in January 2021.

The president is also facing political pressure, especially from progressive Democrats, to act on student debt. The matter could become an issue in the upcoming midterm elections and inaction is unlikely to benefit Democrats.

Forgiving $10,000 of Debt Per Borrower

On the campaign trail in 2020, Biden said he would eliminate up to $10,000 in federal student loan debt per borrower. That appears to be the path the White House is pursuing.

Two White House officials told The Washington Post on May 27 that Biden's plan would see debt forgiveness of $10,000 per student borrower limited to individuals earning less than $150,000 in the previous year or married couples filing jointly who earned less than $300,000.

Biden had reportedly wanted to make the announcement during his commencement speech at the University of Delaware on May 28 but the timing was altered due to the school shooting in Uvalde, Texas.

As no announcement has yet been made, it's not clear how the system would work in terms of screening for income eligibility. But if the administration's plan goes ahead as reported, one-third of borrowers would see their debts cleared, while a further 20 percent would see their total debt cut by at least half.

Thirty-three percent of borrowers hold less than $10,000 in debt, according to figures from the Department of Education, while a further 20 percent hold between $10,000 and $20,000 in debt and 21 percent hold between $20,000 and $40,000 in debt.

Another 18 percent of borrowers have between $40,000 and $100,000 in student debt and just 7 percent hold more than $100,000 in debt.

Forgiving $50,000 in Debt Per Borrower

As no final decision has been made, President Biden could opt to cancel $50,000 in student debt per borrower, which would provide greater benefits to more borrowers, especially those holding the highest amounts of debt.

Democrats such as Senate Majority Leader Chuck Schumer and Senator Elizabeth Warren have urged Biden to cancel up to $50,000 in student loan debt per borrower through executive action.

Canceling $50,000 of debt would clear the loans of 36 million borrowers, according to Forbes.

Schumer and Warren have also argued that the president has the power to do so, despite Biden's skepticism.

In April 2021, Biden asked the Department of Education to prepare a memo on his legal authority over debt forgiveness. Many Democrats have sought the release of the memo but it has not yet been made public.

Warren and Schumer have also proposed legislation that would cancel up to $50,000 in debt for borrowers who earn less than $125,000. That could also be a potential vote winner in crucial midterm elections, where Democrats appear on track to lose the House of Representatives, the Senate, or both.

Joe Biden Speaks at Delaware University
US President Joe Biden delivers the commencement address at the University of Delaware graduation ceremony in Newark, Delaware, on May 28, 2022. The Biden administration is reportedly close to a decision on canceling student debt. MANDEL NGAN/AFP/Getty Images