While the Biden administration has already canceled almost $132 billion in student loan debt throughout its first term, the President has plans for further debt cancellation. However, debt cancellation does come at a price to taxpayers. If all student loan debt is forgiven, it would cost taxpayers an estimated $1.6 trillion.

Current Proposals for Student Debt Cancellation

There are a few different proposals for student debt cancellation as of February 2024, with both the Biden administration as well as several members of Congress offering possible solutions.

Biden-Harris Administration's Plan

President Joe Biden has canceled more than $132 billion in student loan debt since taking office. But now the Biden-Harris administration is planning to accelerate its newly developed Saving on a Valuable Education (SAVE) Plan. This means borrowers who are currently enrolled in the SAVE income-driven repayment (IDR) plan for their federal student loans (which you can enroll in at any time, so long as you qualify) and originally took out $12,000 or less to pay for college and have been repaying for at least 10 years could have their remaining loans forgiven.

Right now, almost 7 million borrowers are enrolled in the SAVE plan, putting them on the path to student loan debt cancellation. The United States Department of Education estimates that within 10 years, 85% of borrowers who took out money for community college (which typically costs less than a four-year college) could be rid of their student loans.

Senators Warren, Pressley, Schumer, and Sanders' Plan

U.S. Senator Elizabeth Warren (D-Mass.), alongside several other senators, wants President Biden and the U.S. Department of Education to expand the relief for student loans. She's proposed the following:

• Eliminating all student loan debt that’s more than the original principal balance of the loan. So if a borrower's debt has accrued so much interest that it’s greater than what they originally took out, that debt is forgiven.
• Cancel all debt for borrowers who have paid their original principal balance. 
• Bump up the date for borrowers who entered repayment at least 25 years ago. 
• Expand hardship qualifications. While there are already some hardship indicators that help folks qualify for cancellation, this proposal suggests adding non-income-based measures, such as incarceration or a history of evictions. The senators also want to see a catch-all provision so borrowers can qualify on a case-by-case basis, rather than be disqualified if their hardship isn’t listed.
• Include borrowers who have been victims of student loan servicer misconduct. This includes people who may have been forced into forbearance or those who were qualified for IDR plans but were not put into them.
• Remove the currently lengthy application process to qualify for relief. Instead, the senators propose that borrowers automatically qualify.
  

Factors Affecting the Cost of Student Debt Cancellation

Student loan debt has risen to more than $1.6 trillion. While less than 1% of that debt is more than 90 days delinquent, the Federal Reserve Bank of New York expects that number to grow at the end of 2024. This is when federal student loan delinquencies will start to be reported to the credit bureaus.

While total student loan debt in the U.S. is still less than total mortgage debt ($12.25 trillion), it’s still more than total credit card debt ($1.13 trillion). That means borrowers have higher student loan balances than credit card balances. Essentially, student loan debt is the largest non-mortgage debt in the U.S.

Most borrowers are repaying federal student loans, which is about $37,088 per borrower. Even though President Biden has been able to cancel billions of dollars in student debt, the U.S. Supreme Court struck down his original cancellation plan in 2023. If it had gone through, it would’ve cost taxpayers an estimated $330 billion to $390 billion, according to the Committee for a Responsible Federal Budget. If all federal loans are forgiven for all 43 million borrowers, it would cost about $1.6 trillion.

The Bottom Line

Canceling student debt can have its upsides, especially for folks who can’t pay for the things they need, whether that’s housing, food, or basic utilities. With more than $1.6 trillion in student loan debt, those who have their federal loans forgiven can put those funds back into the economy. But canceling student loan debt can also negatively impact other folks, costing Americans roughly $1.6 trillion to cancel all outstanding student loan debt.