What will Biden decide about student loan debt? The options are varied and complicated.

The swirling debate over student loan forgiveness could soon reach a turning point, as another deadline to restart loan payments for millions of Americans approaches this summer and midterm elections loom.

President Joe Biden, whose pledge to cancel thousands of dollars in student debt for most borrowers helped him get elected, said late last month that he would have an answer on reducing student debt in “the next couple weeks.”

Members of Congress have pushed Biden to eliminate up to $50,000 in federal student loan debt for those saddled with unpaid college loans. Some are urging that he use his executive authority to make it happen.

“I am considering dealing with some debt reduction,” Biden said. “I am not considering $50,000 debt reduction, but I'm in the process of taking a hard look at whether or not there will be additional debt forgiveness.”

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When student loan payments are set to resume

After mortgages, student loans make up the biggest chunk of household debt at more than $1.5 trillion, according to the Brookings Institution.

At the start of the pandemic, the government froze student loan repayments for most borrowers. The pause, which has now been extended six times, has allowed consumers to use that money elsewhere. Many saved up to buy homes, pay off credit cards or catch up on other bills.

Last month, the White House extended the moratorium through Aug. 31.

“This pause will help 41 million people keep up with their monthly bills and meet their basic needs,” Vice President Kamala Harris said in an announcement. “It will give borrowers some urgently needed time to prepare for a return to repayment.”

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A path to forgiveness

Mark Kantrowitz, a student loans expert who’s written five books about scholarships and financial aid, says there are three potential paths to forgiveness: regulation, legislation or executive authority.

If the president were to use executive action to cancel student debt, he would face legal challenges that Kantrowitz does not expect would not go Biden’s way. And Congress has not yet passed legislation for broad loan forgiveness, nor does it seem poised to.

Regulation might be the president’s best bet, says Kantrowitz, whose books include How to Appeal for More Financial Aid.

The federal government offers four income-driven repayment plans, which set loan payments at amounts meant to be affordable to borrowers based on their incomes and family size.

Most people forget these are also loan forgiveness plans, Kantrowitz says. After making qualifying payments for 20 or 25 years, depending on the plan, borrowers can have their remaining debt eliminated. Those who work in public service may qualify for forgiveness after just 10 years of payments.

One of four plans — the Income-Contingent Repayment Plan — gives the U.S. Department of Education broad regulatory authority such that it could be remade into a means-tested loan forgiveness program, says Kantrowitz.

Means testing, a method of determining eligibility for government assistance, is a way of addressing the concern over helping people who might not need it.

Biden “doesn’t believe that — that millionaires and billionaires, obviously, should benefit or even people from the highest income,” former White House Press Secretary Jen Psaki said after Biden’s remarks last month. “So that’s certainly something he would be looking at.”

Will he or won’t he?

One likely reason that Biden has not followed through on his campaign proposal is the economic and geopolitical fallout of the pandemic and the war in Ukraine, says Siri Terjesen, a management professor and associate dean at Florida Atlantic University.

“With year-on-year inflation closing in on 10%, policymakers who remember basic economics will want to curb further stimulus in order to bring inflation back under control,” she said in an email. “A large student loan forgiveness program would drive up inflation even faster.”

Since the beginning of 2020, Biden has forgiven billions of dollars worth of student debt through other programs. Those include plans for borrowers who were misled by their schools, those with disabilities and others who work in public service.

The push for more continues.

The majority of Americans support student debt cancellation, Massachusetts Sen. Elizabeth Warren argued in a Senate committee hearing earlier this month.

“There is scarcely a working person in America who does not have a friend or family member or coworkers who is weighted down by student loan debt,” said Warren, who supports forgiving $50,000 per borrower.

Canceling that amount would cost $904 billion and forgive the full balances of about 30 million — or 79% — of borrowers, according to a report from the Federal Reserve Bank of New York economists.

Forgiving $10,000 per borrower would cost $321 billion and eliminate the entire balance for 11.8 million borrowers, or about 31%.

Adding an income cap to forgiveness proposals “substantially reduces the cost of student loan forgiveness and increases the share of benefit going to borrowers who are more likely to struggle repaying their debts,” the report says.

Potential problems with broad student debt forgiveness

Advocates of broad forgiveness argue that student loans contribute to racial and socioeconomic wealth gaps. But there are better ways to reduce racial wealth gaps, argues Adam Looney, a senior fellow at the Brookings Institution.

Looney posits that student loan forgiveness is regressive and only targeted debt relief policies can work to address inequities caused by federal student loan programs.

“Measured appropriately, student debt is concentrated among high-wealth households and loan forgiveness is regressive whether measured by income, educational attainment, or wealth,” he writes. “Across-the-board forgiveness is therefore a costly and ineffective way to reduce economic gaps by race or socioeconomic status.”

The next steps

Kantrowitz expects Biden to make one more extension of the payment pause and interest waiver that will last until after the upcoming midterm elections. While the White House hasn’t telegraphed a final plan, Kantrowitz believes that loan forgiveness is likely to happen. “And if it happens it’s likely to be limited in amount and eligibility,” he says.

Meanwhile, the issue continues to shine light on the rising costs of going to college.

College tuition and fees were about 170% more expensive in 2021 than in 2001, Tejersen cites in a new book on reducing higher education bureaucracy.

“The silver lining in the student debt fiasco,” she says, “is that more Americans recognize the need to identify affordable college options.”

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