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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.
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Federal student loan borrowers owing $10,000 or less
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.
Marcus by Goldman Sachs High Yield Online Savings
Goldman Sachs Bank USA is a Member FDIC.
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Annual Percentage Yield (APY)
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Minimum balance
None to open; $1 to earn interest
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Monthly fee
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Maximum transactions
Up to 6 free withdrawals or transfers per statement cycle *The 6/statement cycle withdrawal limit is waived during the coronavirus outbreak under Regulation D
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Excessive transactions fee
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Overdraft fees
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Offer checking account?
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Offer ATM card?
American Express® High Yield Savings Account
American Express National Bank is a Member FDIC.
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Annual Percentage Yield (APY)
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Minimum balance
Minimum balance to open is $0
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Monthly fee
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Maximum transactions
Up to 9 free withdrawals or transfers per statement cycle *The 6/statement cycle withdrawal limit is waived during the coronavirus outbreak under Regulation D
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Excessive transactions fee
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Overdraft fees
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Offer checking account?
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Offer ATM card?
American Express National Bank is a Member FDIC.
Federal student loan borrowers owing over $10,000
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.
If you have private student loans
SoFi Student Loan Refinancing
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Cost
No origination fees to refinance
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Eligible loans
Federal, private, graduate and undergraduate loans, Parent PLUS loans, medical and dental residency loans
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Loan types
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Variable rates (APR)
From 2.24%; from 2.37% for medical/dental residents (rates include a 0.25% autopay discount)
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Fixed rates (APR)
From 2.99%; from 3.12% for medical/dental residents (rates include a 0.25% autopay discount)
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Loan terms
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Loan amounts
From $5,000; over $10,000 for medical/dental residency loans
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Minimum credit score
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Minimum income
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Allow for a co-signer
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
