Personal Finance

Biden administration signals a decision on student loan forgiveness could come soon

Key Points
  • The tens of millions of Americans saddled with student loans may finally hear soon — within the next few months — what the Biden administration has decided to do, if anything, on debt forgiveness.
  • Signs this week suggest the White House is warming up to the idea of broad cancellation.
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GOP senators try to block Biden from canceling student debt

The tens of millions of Americans saddled with student loans may finally hear soon what the Biden administration has decided to do, if anything, on debt forgiveness.

"Not a single person in this country has paid a dime on federal student loans since the president took office," White House press secretary Jen Psaki said at Monday's press briefing, referring to the suspension of interest on the debt.

She went on to say that President Joe Biden "would make a decision about any cancellation of student debt before the conclusion of that pause on student loans."

That pandemic-era relief staying the bills has been in effect for over two years, and it's currently scheduled to expire Aug. 31.

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Even before the public health crisis, repayment troubles were common among student loan borrowers.

The country's outstanding education debt balance exceeded $1.7 trillion and posed a larger burden to households than credit card or auto debt. Roughly a quarter of student loan borrowers — or 10 million people — were estimated to be in delinquency or default.

The financial fallout of the public health crisis has only worsened the situation, experts say. A recent study found that surveyed student loan borrowers reported a 16% likelihood of quickly missing a payment if the payment pause ended.

Although Biden has expressed skepticism about sweeping student loan forgiveness in the past, another development this week suggests he may be warming up to the idea.

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When the topic came up Monday with the Congressional Hispanic Caucus, the president indicated he was currently looking to provide some form of student debt cancellation, according to multiple reports.

Democrats and advocates have put intense pressure on the president to act ahead of the midterms, pointing out that student debt cancellation is a campaign promise he can deliver on without Congress, while much of his agenda has been stymied in the House and Senate.

It's still a debate among some lawyers whether the president has the authority to forgive debt through executive action.

Meanwhile, opponents of student loan cancellation say the policy forces taxpayers to foot the bill for those who have benefited from higher education and is unfair to Americans who didn't attend college, never borrowed or have paid off their debt.

Advocates point out that the mushrooming cost of college has left people with little choice other than to borrow if they want to get a decent paying job, and that people of color and women are shouldering the most pain from the lending system. Two-thirds of federal student debt is held by women.

Around 70% of relief from a theoretical $50,000 in student debt forgiveness would go to those in middle-income and low-income neighborhoods, according to a recent study by The Federal Reserve Bank of New York.

Have student debt? What is it like waiting for a decision on forgiveness? If you're willing to share your experience for a story, please email me at Annie.nova@nbcuni.com.