Who Benefits From Biden’s Student Debt Forgiveness Plan?

As experts go to work studying the impact of President Joe Biden’s unprecedented plan to forgive student loan debt for a broad swath of Americans, one early analysis shows just how far relief may stretch.

Biden promised to clear up to $10,000 in federal student loan debt per borrower making less than $125,000 per year (250,000 for married couples). Borrowers who received a Pell Grant – need-based federal financial aid aimed at making college more affordable for low- and middle-income students – can qualify for up to $20,000 in forgiveness.

Though Biden has yet to reveal some key details of the federal student loan forgiveness program, politicians, academics, and advocates have been quick to analyze federal data to determine who will benefit and how much it will cost.

Not surprisingly, the costs are high.

A new analysis from the Wharton School of the University of Pennsylvania found that President Biden’s proposed student loan debt cancellation alone will cost between $469 billion to $519 billion over the 10-year budget window, depending on whether existing and new students are included.

The Student Borrower Protection Center (SBPC) was quick to analyze federal data to determine how many borrowers will likely qualify for forgiveness, as well as how many will have their loans completely erased as the Department of Education (ED) begins to clear loan balances.

SBPC’s analysis found that approximately 41 million of 45 million total student loan borrowers will qualify for some forgiveness under this plan. The White House estimates that figure will be closer to 43 million.

Nearly half of borrowers who qualify for forgiveness will see their debt completely erased by ED, according to SBPC’s analysis. That includes about six million borrowers who did not receive a Pell Grant and owe $10,000 or less.

Pell Grant recipients comprise a significant portion of the borrowers that will benefit from Biden’s plan.

Sixty-eight percent of all undergraduate borrowers received a Pell Grant to subsidize the costs of college, while 44% of graduate borrowers received a Pell Grant as an undergraduate, according to SBPC.

Seventy-nine percent of all Pell recipients still have debt 12 years after starting college, according to SBPC. And of those borrowers, 53% who are still in debt after 12 years owe $20,000 or less.

That adds up to some 14 million borrowers who did receive a Pell Grant that will see all their debts cleared based on the $20,000 cap, according to the SBPC analysis.

A key tenant of the president’s plan is excluding the wealthy from student debt relief.

While Biden campaigned on the promise to cancel some student loan debt, rumors of an income cap only began circulating this summer. The president ultimately landed on an income cap of $125,000 per year, or $250,000 per year for couples who file their taxes jointly.

At those levels, approximately 8% of borrowers will not qualify for forgiveness, according to SBPC. That’s approximately 4 million borrowers.

In a press briefing Wednesday, Biden stressed that most beneficiaries of the plan will be people making less than $75,000 per year. A White House statement further drove the point home: 90% of relief dollars will go to those making less than $75,000 per year, it said. Nobody in the top 5% of incomes in the U.S. will receive debt relief under this plan.

Wharton’s analysis, meanwhile, found that about 75% of the benefit of Biden’s student debt forgiveness plan falls to households making $88,000 or less per year.

The White House fact sheet outlined what percentage of beneficiaries in different age ranges will see relief:

SBPC’s analysis found that just under half of Black people still holding federal student loan debt may have their loan balance completely erased.

According to SBPC, 3.8 million of the 8.5 million Black people with federal loans will have those loans erased.

Many of these borrowers will get this relief thanks to the extra cancellation for borrowers who took out Pell Grants. According to the White House, Black students are twice as likely to have received Pell Grants than white peers.

Likewise, the White House said borrowers of color are also more likely than their peers to receive Pell Grants and this will benefit from Biden’s student debt relief plan.

“By targeting relief to borrowers with the highest economic need, the administration’s actions are likely to help narrow the racial wealth gap,” the White House said in its statement.