Student loan forgiveness for $10,000 or $50,000? What to know right now

Money is arriving from the March stimulus law through stimulus checks of up to $1,400 per person, $300 supplemental unemployment checks, new health care savings and the child tax credit that’s poised to bring families thousands of dollars (calculate your total here). The next target could be forgiving student loans.

Student loan debt in the US is at $1.71 trillion, which makes it second in consumer debt behind home mortgages. There have been calls from lawmakers to forgive some, if not all, the debt. President Joe Biden included canceling $10,000 of loan debt per student as part of his election campaign, but some members of Congress want him to forgive $50,000 per student. 

So far Biden hasn’t canceled any debt across the board, though $1 billion in loans for students defrauded by for-profit colleges was forgiven. Here’s where the situation stands now when it comes to student loan forgiveness. We’ll continue to update this story as it develops. 

What’s happened with student loan debt so far? 

During his presidential campaign, Biden called for forgiving $10,000 of federal student loan debt per person. He also laid out additional plans for college students in the Biden Plan for Education Beyond High School, such as free tuition and more money for federal grants.

Shortly after taking office, Biden signed an executive order to extend till the end of September the pause on student loan payments and interest. Former President Donald Trump initially suspended payments at the start of the coronavirus pandemic, and the loan suspension was extended two additional times. 

In Biden’s American Rescue Plan, a provision removed any tax penalty if student loans are forgiven. The IRS treats debt discharged for less than what’s owed as taxable income. This would apply to both government and private loans. The forgiveness provision lasts until Dec. 25, 2025.  However, as president, Biden has yet to formally forgive any student loan debt. 

It’s important to keep in mind how there has been no movement on loan debt cancellation as there is a growing number of scammers claiming they can help you with getting your loans forgiven. 

Is Biden even authorized to forgive $50,000 of student loan debt? 

During a CNN town hall back in February, an audience member asked if Biden would cancel $50,000 of student loan debt.

“I’m prepared to write off a $10,000 debt, but not 50” thousand, Biden said. “Because I don’t think I have the authority to do it by signing the pen.”

It appears Biden may’ve changed his sentiment. On April 1 he asked Education Secretary Miguel Cardona if it’s within the president’s powers to cancel $50,000 in student loan debt. The department has yet to announce its findings. 

What could happen next?

Depending on the response from the Education Secretary’s office, a few things could take place. Biden may be able to sign an executive order that cancels some debt per student. Or it may be that Congress would have to pass a bill, if sweeping cancelations are outside Biden’s power. In either case, the final amount canceled, and any rules and exceptions over public and private debt, would be contentious areas of negotiation. 

Whatever the outcome, it’s unlikely to occur imminently, though it’s a topic we’re keeping a close eye on.