Student loan forgiveness is a looming concern for millions of Americans hurt by the pandemic, including Millennials, who hold a higher average student loan debt than graduates from other generations and report a nearly 30% unemployment rate.
Women and people of color are also disproportionately impacted by student loan debt — especially Black women. A 2018 study summary from Brookings found that 49% of Black borrowers defaulted on their student loans, compared to 21% of non-Hispanic white borrowers, and disparities persisted even after controlling for family income and parent education level.
For now, federal debt holders do not have to make payments: President Joe Biden extended the freeze on federal student loans through at least September of 2021. The pause gives borrowers temporary financial wiggle room during the pandemic, but finding a long-term solution is more complicated.
When Can Student Loan Holders Expect Changes?
The short answer is that the timeline is still up in the air. The budget for a $1.9 trillion COVID-19 relief package, passed by the Senate on Feb. 5, didn't even mention canceling student debt.
Biden has promised to forgive student debt, though lawmakers now say they may not propose legislation until late summer or early fall. Even then, it's still unclear how much relief borrowers will receive.
Student Loan Forgiveness Plans in 2021
There are two popular student loan proposals under consideration. One is the plan that Biden unveiled during his campaign, which would cancel $10,000 in federal student loan debt per borrower. Some Democrats in Congress, however, are pushing for a law that would forgive up to $50,000 in debts.
The latter proposal would cancel all debt for 80% of federal student loan borrowers. Advocates contend that canceling high levels of outstanding debt will stimulate the economy and reduce the financial burden on two generations of young people affected by rising college costs and higher education policies.
Opponents of the $50,000 plan argue that forgiving too much student loan debt doesn't help those who need it the most. One higher education expert, Mark Kantrowitz, said more than a third of the borrowers who would receive loan forgiveness under the $50,000 proposal have six-figure salaries.
By contrast, Kantrowitz said $10,000 in loan forgiveness would completely forgive a third of borrowers' student loan debt while eliminating most of the debt owed by borrowers who are in default on their loans. In 2019, 1 in 4 student loans was in default.
What About Future Borrowers?
Many of the calls for loan forgiveness demand immediate relief for borrowers saddled with debt. But what about people who will be graduating with debt over the next several years? Will they receive $10,000 or $50,000?
For now, the most likely scenario is lawmakers passing a bill to double the average Pell Grant, reducing the amount of total student debt, especially among low-income students. However, like the payment freeze and proposed debt erasures, a timeline for this change is still unknown.
What is a Pell Grant?
A Pell Grant is awarded to students who have demonstrated significant financial need. The maximum amount awarded for the 2021–22 academic year will be $6,495. Pell Grants do not need to be repaid in most circumstances.
Evan Thompson is a Washington-based writer for TBS covering higher education. He has bylines in the Seattle Times, Tacoma News Tribune, Everett Herald, and others from his past life as a newspaper reporter.
Header Image Credit: Damir Khabirov | Getty Images
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