Student Loan Limbo Especially Biting for 11.8 Million

Number of the Day: The most relevant or interesting figure in personal finance

NOTD - 11.8 Million

That’s how many federal student loan borrowers who may have been expecting to have their entire debt wiped out now reportedly face another month or two in limbo.

An estimated 31% of the country’s more than 37 million federal student loan borrowers—or 11.8 million—would no longer have any debt if President Joe Biden used his executive authority to forgive $10,000 per borrower, as the Washington Post had reported in May he was getting ready to do. But now Biden doesn’t plan to make a final decision until later this summer, The Wall Street Journal reported Tuesday, citing unnamed administration officials and other people familiar with the matter.

A late-summer decision would mean student loan borrowers would have to sweat it out as the Sept. 1 deadline nears for interest and payments to resume. A pandemic-era freeze on loan obligations has been extended six times already, lasting over two years and laying bare how hard it was for many borrowers to pay their loans even before the pandemic.

Forgiveness of up to $10,000 per borrower would wipe out $321 billion in federally owned student loans, economists at the Federal Reserve Bank of New York calculated for a report released in April. Politicians on the left have urged Biden to use his executive authority to wipe out up to $50,000 of loans per borrower—a move that would cost $904 billion and clear all debts of 79% of borrowers, the economists estimated—but Biden has rejected going that far.

Biden, who had said a decision on forgiveness was “a couple of weeks” away in late April, is still weighing the political and economic fallout of his decision, the Wall Street Journal reported. Earlier in his presidency, he had been reluctant to use his executive powers to forgive student loan debt, instead calling on Congress to pass a bill. But in Congress he would need the approval of the Senate, where his other major legislative proposals have hit roadblocks within his own party.

Have a question, comment, or story to share? You can reach Diccon at dhyatt@thebalance.com.

Want to read more content like this? Sign up for The Balance’s newsletter for daily insights, analysis, and financial tips, all delivered straight to your inbox every morning!

Article Sources