About 38 million Americans had a total federal student loan debt of about $1.38 trillion as of December, according to the New York Federal Reserve. But who benefits from proposed blanket forgiveness policies that have been proposed in recent years by Democrats? 

A new report from the Federal Reserve Bank of New York looked at the impact of both $10,000 and $50,000 forgiveness of federal student loans—as well as capping the eligibility of student loan forgiveness to those earning less than $75,000. 

Leading Democrats including Senate Majority Leader Chuck Schumer (D-N.Y.), Sen. Elizabeth Warren (D-Mass.), and Rep. Ayanna Pressley (D-Mass.) have repeatedly pushed for President Joe Biden to permanently cancel up to $50,000 per person of loan debt. Biden and other Democrats, meanwhile, have indicated support for a smaller level of forgiveness, around $10,000.

It turns out that while forgiving a larger amount does mean more Americans benefit, using a smaller forgiveness amount and a more targeted approach—such as an income cap—means the programs are much more likely to benefit borrowers who are more likely to struggle with repayment. Not only that, the U.S. would spend less money forgiving the loans of Americans who are likely to repay their loans anyway. 

That’s because the biggest student loan balances tend to come from graduate loans. And typically the Americans holding those balances, in the end, earn higher incomes, are more affluent, and are less likely to struggle paying off their loans long-term, according to the NY Fed researchers. 

Forgiving $50,000 of outstanding student loans from all borrowers would cost $904 billion, the NY Fed reports. Under this plan, nearly eight out of 10 borrowers, or 29.9 million Americans, would be completely debt-free. The average American would get about $23,856 in debt relief and this type of forgiveness would eliminate about 77% of loans that are delinquent or in default. 

Wiping out $10,000 in debt, in contrast, would cost about $321 billion. Nearly a third of borrowers would see their outstanding loans disappear, receiving an average $8,478 of their loans forgiven. The $10,000 in forgiveness would cancel about 31% of delinquent loans or those in default. 

That said, researchers noted that the net cost of these forgiveness policies will likely be a little bit lower, since the estimates do not take into account anyone who will eventually have their loans forgiven through existing federal programs and waivers.

The $10,000 forgiveness policy distributes a larger share of benefits to those with low- and middle-range credit scores and Americans who reside in lower-income and minority neighborhoods. “In general, we find that smaller student loan forgiveness policies distribute a larger share of benefits,” the authors of Thursday’s report write.

But with an income cap of $75,000 for these forgiveness proposals, the cancellations not only substantially reduce the cost of student loan forgiveness, they increase the share of benefits going to borrowers who are more likely to struggle repaying their debts, no matter the forgiveness amount. 

“We find that adding an income cap to forgiveness proposals substantially reduces the cost of student loan forgiveness and increases the share of benefit going to borrowers who are more likely to struggle repaying their debts,” the authors write.