$10,000 in Student Loan Forgiveness Could Cancel Federal Debt for 1 in 3 Borrowers

 June 7, 2022
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The White House says there’s no final decision on student loan cancellation, despite a report from the Washington Post that the Biden administration is set to forgive $10,000 per federal borrower.

The latest Student Loan Hero study looks at how borrowers would be impacted by the proposed $10,000 in forgiveness. For deeply indebted borrowers, the impact might be minimal, but it could potentially free others — 1 in 3 eligible borrowers, in fact — from all their federal student debt.

The difference lies in how much debt each borrower carries and what kind of student loans they have. It’s expected that only federal loans owned by the government will be eligible for forgiveness, accounting for about $1.4 trillion (or 78%) of outstanding student debt. Forgiveness isn’t likely for borrowers with privately managed federal or private student loans. Not only that, but the Washington Post report highlights that forgiveness is likely to be limited to Americans who earn less than $150,000 annually or married couples filing jointly who earn less than $300,000 a year.

Student Loan Hero researchers looked specifically at loans issued via the federal government’s direct loan program (including PLUS loans). We found that $10,000 in forgiveness would provide significant relief — more in some places than in others.

Key findings

  • 1 in 3 (33.3%) borrowers could see all their federal student direct loans wiped away under a $10,000 forgiveness plan. An additional 20.1% could see their balances cut by at least half.
  • 37.8% of Wyoming borrowers would discharge all their federal student debt — the highest percentage among the 50 states and the District of Columbia. Rounding out the top three are Nevada (36.6%) and Utah (36.4%).
  • The District of Columbia has the lowest percentage of borrowers who would shed all their federal loans (25.3%), with Virginia (28.6%), Georgia (28.9%) and Maryland (28.9%) close. D.C. also has the highest rate of borrowers who owe $100,000 or more in student loans, at 16.0%.
  • 7.3% of all borrowers owe more than $100,000, meaning they’d still be on the hook for at least 90% of their balances.

1 in 3 borrowers could have debt wiped away

According to our analysis, 33.3% of borrowers — about 13.1 million people — would see their entire federal direct loan debt wiped away under a $10,000 forgiveness plan. All in all, this forgiveness would amount to $326.4 billion.

An additional 20.1%, or 7.9 million people, would see their balances cut by at least half. Likewise, 21.2% (8.3 million people) would see a quarter of their respective balances disappear, and 18.2% (7.1 million people) would get rid of at least 10% of their debt.

Federal student loan balances: Breakdown of how much borrowers owe
Less than $10,000 Between $10,001 and $20,000 Between $20,001 and $40,000 Between $40,001 and $100,000 Between $100,001 and $200,000 More than $200,000
% who owe … 33.3% 20.1% 21.2% 18.2% 5.2% 2.1%
# who owe … 13,060,222 7,870,578 8,326,691 7,124,218 2,048,903 813,188
Source: Student Loan Hero analysis of U.S. Department of Education data. Note: As of Dec. 31, 2021.

However, 7.3% of borrowers owe more than $100,000 in student loans. For them, $10,000 in forgiveness wouldn’t make a huge dent in their balance, as they’d still owe at least 90% of their total federal student loan debt.

And as mentioned, the numbers above only account for direct loans — the most popular loan type, but by no means the only one. Other federal student loans, such as FFEL and Perkins loans, as well as all private student loans, would continue to weigh on borrowers’ finances.

Since direct loans were the only kind of loan eligible for the emergency federal forbearance that was passed in response to the COVID-19 pandemic — it’s since been extended six times — we predict they might be the only ones eligible for $10,000 in loan forgiveness. That said, we don’t know yet which loans would be covered if loan forgiveness were to happen. (UPDATE: The payment pause in August 2022 was extended a seventh time through Dec. 31, 2022.)

Wyoming, Nevada, Utah borrowers most likely to become debt-free through student loan forgiveness

When we look state by state at the impact of $10,000 in loan forgiveness, Wyoming, Nevada and Utah have the highest percentage of borrowers who would see their federal student loan balance wiped away.

In Wyoming, 37.8% of the state’s borrowers would become student loan-free. In Nevada, 117,477 borrowers — 36.6% of the state’s total — would get a clean slate. And in Utah, 36.4% of its borrowers could start fresh.

Compared to some other states, these three have fairly low populations of student loan borrowers. Borrowers in these states also tend to have smaller debt loads, allowing for $10,000 in loan forgiveness to have a more significant impact.

That said, even in these top-of-the-list states, the average debt is still significant. For example, our analysis of Utah student loans shows average balances among federal and private borrowers of $31,046. Our data on Nevada student loans yields average balances of $32,402.

Other states with a high percentage of debt-free people under a $10,000 forgiveness model include North Dakota, Alaska and Oklahoma.

Percentage of borrowers who would have their federal student loan debt eliminated with $10,000 in forgiveness
Rank State % of borrowers Number of borrowers
1 Wyoming 37.8% 19,216
2 Nevada 36.6% 117,477
3 Utah 36.4% 105,619
4 North Dakota 35.8% 29,724
5 Alaska 35.4% 22,377
6 Oklahoma 35.0% 154,533
7 New Mexico 34.8% 72,894
7 Nebraska 34.8% 81,647
7 Louisiana 34.8% 208,146
10 West Virginia 34.6% 74,170
11 Iowa 34.5% 143,732
12 Arkansas 34.4% 124,486
13 Rhode Island 34.3% 46,627
13 Arizona 34.3% 281,280
15 Texas 34.2% 1,157,540
16 Mississippi 34.1% 139,409
17 Idaho 33.8% 70,552
18 California 33.5% 1,178,004
19 Kentucky 33.3% 186,873
19 Kansas 33.3% 120,678
21 South Dakota 33.2% 36,539
21 Wisconsin 33.2% 229,877
23 Montana 33.1% 39,416
24 Maine 32.9% 58,538
25 Hawaii 32.7% 37,059
25 Washington 32.7% 242,539
27 Indiana 32.4% 276,776
28 Massachusetts 31.9% 275,388
29 New York 31.8% 734,814
30 Florida 31.6% 768,825
30 Delaware 31.6% 38,567
30 New Jersey 31.6% 360,326
33 Tennessee 31.5% 253,956
33 Alabama 31.5% 187,397
35 Michigan 31.4% 417,179
35 Ohio 31.4% 529,581
37 Connecticut 31.3% 148,976
37 Illinois 31.3% 479,649
39 New Hampshire 31.2% 56,661
39 Missouri 31.2% 240,471
41 Colorado 31.0% 226,013
42 Minnesota 30.8% 231,043
42 Oregon 30.8% 156,789
44 Pennsylvania 30.2% 519,022
45 Vermont 30.0% 21,911
46 South Carolina 29.4% 203,899
47 North Carolina 29.2% 363,504
48 Maryland 28.9% 228,619
48 Georgia 28.9% 450,174
50 Virginia 28.6% 295,102
51 District of Columbia 25.3% 27,520
Source: Student Loan Hero analysis of U.S. Department of Education data. Note: As of Dec. 31, 2021.

When exploring the percentage of borrowers who would have their debt eliminated with $10,000 in loan forgiveness, the District of Columbia, Virginia, Georgia and Maryland sit at the bottom.

This finding aligns with our analysis of student loan debt in these states. Previously, we found that the average federal and private student loan balances in these states are:

  • District of Columbia: $52,049 (highest in U.S.)
  • Maryland: $39,505 (second-highest)
  • Georgia: $39,272 (third-highest)
  • Virginia: $37,098 (fourth-highest)

Regardless, these locations would still see a significant population of borrowers become debt-free. In D.C., 25.3% of its borrowers would shed their debt. In Virginia, Georgia and Maryland, that percentage was higher at just below 29%.

Just ahead of this cluster of those least likely to have eligible federal debt less than $10,000 are the Carolinas.

D.C. also has the highest percentage of borrowers who owe more than $100,000, and thus would be left with at least 90% of their balance: 16.0%, or 17,396 people.

Percentage of borrowers who owe at least $100,000 in federal student loans
Rank State % of borrowers Number of borrowers
1 District of Columbia 16.0% 17,396
2 Maryland 10.9% 86,239
3 Georgia 9.8% 152,739
4 Virginia 8.7% 89,892
5 Delaware 8.5% 10,405
5 Mississippi 8.5% 34,759
5 New York 8.5% 195,857
5 Illinois 8.5% 130,069
9 California 8.4% 295,810
9 Florida 8.4% 204,532
11 South Carolina 8.2% 56,887
12 Vermont 8.1% 5,950
12 Hawaii 8.1% 9,172
12 North Carolina 8.1% 100,655
15 Alabama 8.0% 47,908
16 Colorado 7.6% 55,608
16 Tennessee 7.6% 61,222
18 New Jersey 7.5% 85,706
18 Oregon 7.5% 38,024
18 Washington 7.5% 55,362
21 Connecticut 7.3% 34,688
22 Arizona 7.2% 59,494
22 Louisiana 7.2% 43,283
22 Michigan 7.2% 94,877
25 Pennsylvania 7.1% 121,951
26 Missouri 7.0% 54,076
26 New Mexico 7.0% 14,597
26 Massachusetts 7.0% 59,996
29 Nevada 6.9% 22,101
30 Alaska 6.8% 4,307
31 New Hampshire 6.7% 12,189
32 Texas 6.5% 218,535
32 Ohio 6.5% 108,888
34 Arkansas 6.4% 23,173
35 Maine 6.3% 11,118
36 Montana 6.2% 7,414
37 Rhode Island 6.1% 8,340
37 Nebraska 6.1% 14,224
39 Kansas 6.0% 21,735
40 Minnesota 5.9% 44,307
40 Kentucky 5.9% 33,137
40 Utah 5.9% 17,099
43 Indiana 5.8% 49,519
43 Oklahoma 5.8% 25,469
45 Idaho 5.7% 11,950
45 Wyoming 5.7% 2,906
47 West Virginia 5.6% 12,079
48 Wisconsin 5.5% 38,345
49 South Dakota 5.2% 5,665
50 Iowa 5.1% 21,041
51 North Dakota 4.3% 3,609
Source: Student Loan Hero analysis of U.S. Department of Education data. Note: As of Dec. 31, 2021.

Other ways to get your student loans forgiven

While reports indicate some form of federal student loan forgiveness is on the way, it’s never a certainty until it’s announced — and we also don’t yet know which loans will be eligible. Still, in the meantime, there are other ways to get your student loans forgiven.

  • The Public Service Loan Forgiveness (PSLF) program will forgive your loans after 10 years of working in public service. And in October 2021, this program was temporarily expanded to include borrowers who didn’t previously qualify — though you’ll need to act before Oct. 31, 2022.
  • The Teacher Loan Forgiveness program offers up to $17,500 in student loan cancellation after five years of working in an eligible school.
  • Most states also offer loan repayment assistance programs to borrowers in certain occupations, typically those who work in high-need or underserved areas. Plus, more and more employers are offering student loan assistance as an employee benefit.
  • Finally, you could get your student loan balance forgiven after 20 or 25 years on an income-driven repayment plan. While you usually have to pay taxes on the forgiven amount, the government has waived this tax bill until at least Jan. 1, 2026, with the American Rescue Plan Act of 2021.

Since President Joe Biden took office in January 2021, his administration has announced plans for $25 billion in forgiveness, including:

  • More than $8.5 billion for more than 400,000 borrowers related to total and permanent disability discharges
  • $7.3 billion for more than 127,000 borrowers through the PSLF program
  • $5.8 billion for 566,000 students who attended Corinthian Colleges between 1995 and its closure in 2015

Published in News & Policy, Press, Research