Borrowers could soon get good news: It seems likelier than ever that President Joe Biden will take the extraordinary step of announcing widespread federal student loan debt forgiveness in the coming weeks.
In recent months, Democratic lawmakers and voters have been pushing the president to fulfill his campaign promise of canceling $10,000 in federal student loan debt per borrower. Just last week, Biden said he would give more details on a federal forgiveness plan “in the next few weeks”—the first time he’s given any sort of timeline for action.
Still, very little is known about exactly what steps Biden may take. The amount of debt to be forgiven, who would qualify, when it would start, and whether it will actually happen at all are up in the air. Another question: Does Biden have the legal authority to forgive student loan debt?
With all of that in mind, here’s what we know about the most pressing student debt relief questions.
Will student loan forgiveness happen?
Fortune doesn’t have a crystal ball, so it’s impossible to say for certain. But Biden has said recently that his administration is considering different forgiveness options, the strongest signal yet that widespread forgiveness will happen soon.
Biden has forgiven debt for some disabled and defrauded borrowers, and made it easier for those already in the public service loan forgiveness program to have their debt forgiven. So far, his administration has forgiven over $17 billion of student loan debt. Still, borrowers owe over $1.74 trillion, collectively, with federal loans comprising over $1.6 trillion of that.
How much will be forgiven?
Until the president makes an official announcement, nothing is guaranteed. Biden said he wasn’t considering $50,000 per borrower, as many Democrats have pushed for. Instead, the figure will be lower—potentially around $10,000 per borrower, which is what Biden backed during his presidential campaign. But there is a lot of room between $10,000 and $50,000, so he might land somewhere in the middle.
Any amount of debt forgiveness would have a profound impact on borrowers. Forgiving $10,000 per borrower would eliminate $321 billion of student loans, leaving about one-third of borrowers debt-free, according to a recent report from the Federal Reserve of New York. Erasing $50,000 in debt, by contrast, would discharge $904 billion, and eight in 10 borrowers would be debt-free as a result.
Who will qualify for student loan forgiveness?
Another unknown. But White House Press Secretary Jen Psaki told a gaggle of reporters yesterday that the administration is “looking at steps to help people making less than $125,000 a year.”
The Washington Post reported earlier this week that the income cap on forgiveness would be either $125,000 or $150,000 per individual filer, and double that for married couples, based on the previous year’s income. The Post also reported that forgiveness would be limited to undergraduate loans, leaving out graduate loans and potentially parent PLUS loans.
It’s almost certain that forgiveness will apply only to federal loans. That said, it’s possible Biden will present other changes to the federal student loan program, like extending the federal payment pause, or other structural tweaks, when announcing a forgiveness plan.
When will we know more details?
Last week, Biden said during a speech that he will “have an answer on [student loan forgiveness] in the next couple of weeks.” Many people are expecting an announcement before the midterm elections later this year—student loan forgiveness polls well with Democrats and young voters—though the situation is fluid, and the issue of cancellation is complicated.
What else do borrowers need to know?
Though Biden hasn’t enacted the widespread forgiveness that many Democrats are clamoring for, he has forgiven more student loan debt than any other president via targeted measures for smaller groups of borrowers, including some disabled borrowers, some defrauded borrowers, and others. And his administration has retooled existing forgiveness programs, including the Public Service Loan Forgiveness program and income-based repayment plans. When student loan payments resume, 7.5 million borrowers will benefit from being pulled out of default.
With federal student loan payments still paused from the coronavirus pandemic, borrowers are saving $1.5 billion per month in interest, according to a recent report. Those who make their payments will see their dollar go further, as the money will be put directly toward the principal balance of the loan.
