May 4, 2020

Widespread Student Loan Forgiveness Is More Likely Now Than Ever Before – Here’s Why

Widespread Student Loan Forgiveness Is More Likely Now Than Ever Before – Here’s Why


44 million Americans struggle under the weight of student loan debt. The concept of widespread student loan forgiveness – a blanket cancellation of outstanding student loan debt for most or all student loan borrowers – has long been a pipe dream for many. But that may no longer be the case.

Due to a combination of changing circumstances and increasing political support, some sort of widespread student loan forgiveness is more possible now than it has ever been before. Here’s why.

The Student Loan Landscape Has Rapidly Changed

Student loan debt in America has been around a long time – around 60 years or so. Originally, student loans were designed as an easy, low-cost avenue to increase access to higher education. But it’s only relatively recently that student loan debt has ballooned into the monster that it is today.

In 2010, total outstanding student loan debt in the United States reached around $833 billion, exceeding outstanding credit card debt for the first time. Fast forward just 10 years, and the total amount of outstanding student loan debt has doubled to more than $1.6 trillion. That explosive growth in such a relatively short period of time has caused borrowers to struggle financially while putting off savings, retirement, and major life decisions like buying a home.

And with the economic damage of the COVID-19 pandemic rapidly unfolding, student loan borrowers are struggling now more than ever, with no end in sight.

Existing Programs Are Deeply Flawed

Lawmakers have repeatedly tried to create programs to mitigate the impact of this massive student loan debt burden, but the results have been mixed, at best.

Public Service Loan Forgiveness – which was designed to incentivize graduates to commit to working for a nonprofit or government organization – has been poorly administered, leading to denial rates as high as 99%. The TEACH Grant program – created to provide financial support for teachers – has also been poorly run, leading to litigation. The Borrower Defense to Repayment program, which was designed to provide debt relief to borrowers defrauded by their schools, has been mired in political and legal battles for nearly the entirety of its existence.

Even when Congress does the right thing and tries to provide some form of immediate relief to student loan borrowers, it often does not go well. Congress passed the CARES Act to stop all collections on government-held federal student loans in response to the COVID-19 pandemic, but the government went ahead and continued garnishing people’s wages, anyway.

Presidential Candidates Have Voiced Support For Student Loan Forgiveness

Thanks in part to the recent Democratic primary, the concept of student loan forgiveness is a fringe idea no longer.

Senator Elizabeth Warren was the first candidate who proposed widespread student loan forgiveness, calling for across-the-board cancellation of $50,000 in student loan debt per borrower, with the forgiveness phased out for higher income earners. Senator Bernie Sanders went further, proposing to cancel all outstanding student loans without regard to a borrower’s income or financial circumstances.

Senator Joe Biden, the presumptive Democratic nominee for president, long rejected calls for student loan forgiveness. However, he has now shifted his position and is calling for widespread student loan forgiveness, albeit targeted towards undergraduates of certain institutions and capped at lower amounts. While Biden’s proposal does not go nearly as far as Sen. Warren’s or Sen. Sanders’s plans, the fact that Biden has adopted a position calling for student loan forgiveness is significant, and it is indicative that this issue is no longer a fringe idea.

Student Loan Forgiveness Has Support in Congress

Most legal experts agree that widespread student loan forgiveness must originate as a bill in Congress. Senator Warren had argued that as President she could institute student loan forgiveness via executive order; this could be true, but such powers would likely be limited to government-held federal student loans only. To allow student loan forgiveness for private student loans and other federal loans not administered directly by the government, congressional legislation would be needed.

But student loan forgiveness has rapidly gained support in Congress, as well. Senate Democrats recently called for $10,000 in across-the-board student loan forgiveness as part of a COVID-19 relief package. House Democrats went further, calling for $30,000 in across-the-board student loan forgiveness. Neither proposal has become law – but both garnered significant support.

Bottom Line

Student loan forgiveness – a topic that was once mere chatter in online forums and small advocacy organizations – has rapidly become a topic of mainstream political discourse. And as Americans watch – for a second time in 10 years – as major corporations and educational institutions are bailed out by the federal government during an economic crisis, the calls for some sort of widespread student loan forgiveness are only intensifying.

It is too soon to know for sure whether student loan forgiveness will actually come to pass, what it would look like, how widespread it would be, and who would qualify. And it is still possible that, despite the momentum, student loan forgiveness could never happen. Currently, student loan forgiveness proposals have not garnered sufficient support to be able to pass the current Congress, and the White House has not publicly expressed any interest in student loan forgiveness, either.

But the student loan landscape has rapidly changed in the last 10 years, and even in the last several months. Things could change further depending on the outcome of the 2020 election. So, stay tuned. A lot could happen.



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