More than half of federal student loan borrowers owe less than $20,000 — here’s where everyone else stands

With all the ongoing conversations around President Joe Biden forgiving $10,000 in debt for federal student loan borrowers — a decision reported to be announced sometime this summer — Americans have been left wondering just how many people this would leave completely debt free.

According to recent data from The Washington Post, most federal student loan borrowers do in fact have small balances and would therefore benefit greatly from having $10,000 wiped away. About a third (33%) of borrowers owe less than $10,000, while another 20% owe less than $20,000.

Here's a look at how everyone's student debt shakes out:

• 33% of borrowers owe less than $10,000
• 20% of borrowers owe between $10,000 and $20,000
• 21% of borrowers owe between $20,000 and $40,000
• 18% of borrowers owe between $40,000 and $100,000
• 7% of borrowers owe $100,000 or more

The numbers show how more than half (53%) of federal student loan borrowers actually have less than $20,000 in debt. With a whopping 43.4 million people in the U.S. having federal student loans, however, that still means there are nearly 20 million adults left with large balances of $20,000 or higher — over three million adults currently have six-figure federal student loan debt.

Even if $10,000 in loan forgiveness would make about a third of federal student loan borrowers debt free, how much of an impact it would make on the rest of the student debt demographic varies.

If President Biden's proposed $10,000 in student loan forgiveness would mean your debt would be completely wiped away, it's easy to want to bank on it happening. Holding out for possible forgiveness means you could potentially get off the hook for having to pay off the rest of your student loans — and who doesn't want that?

The obvious risk here is there's always a chance President Biden doesn't actually go through with forgiving $10,000 in student loan debt, or any debt at all. Or perhaps there's a maximum income threshold to qualify for forgiveness that you end up exceeding.

As long as the federal student loan payment and interest freeze is in effect — now through Aug. 31, 2022, and perhaps even longer — you can get away with not making payments toward your student loans and not accruing interest. There's no cost to you for holding off.

During this time, however, you should consider setting aside those monthly payments you would otherwise make so the money is still there should forgiveness fall through by the time the payment and interest freeze ends.

Stashing this cash in a high-yield savings account for the time being helps you buy time while we wait to hear about any loan forgiveness, and for the forbearance to end. Plus, with interest rates rising, you'll be able to score a better return on your savings today than you could a year or two ago.

Both the Marcus by Goldman Sachs High Yield Online Savings account and the American Express® High Yield Savings Account offer above-average interest rates, have zero monthly fees and require no minimum balance to open an account.

It's very likely that President Biden won't cancel more than $10,000 worth of debt per federal student loan borrower, if that.

For those who owe more than $10,000, continuing to make payments on your debt until you reach that $10,000 threshold won't hurt you since there's a good chance you'll owe it anyway. With the payment and interest freeze in effect right now, any amount paid will go directly toward chipping away at your principal amount. You'll finally be able to make a considerable dent in your debt, while narrowing down your remaining balance to as low as you can get it.

For those with private student loans, remember that the federal student loan payment and interest freeze does not apply to private loans, and reports indicate that Biden is unlikely to cancel private student loan debt. If you do have a private loan and want to make your payments more manageable, you should consider refinancing your loan to get a better interest rate or payment terms.

Select ranked SoFi as the best overall lender for student loan refinancing.

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