Who got the most student loan forgiveness?
Who got the most student loan forgiveness? The answer is do not who are you thinking about.
Here’s what you need to know — and what it means for your student loans.
The pause in student loan payments has been a financial lifeline for millions of student borrowers during the Covid-19 pandemic. As a result of a national emergency, 41 million student borrowers have received unprecedented student loan relief, including more than two years without federal student loan repayment. Now a new study of the Committee for a Responsible Federal Budget shows surprising data on who benefited the most from the student loan payment break.
Student Loan Forgiveness: Who Will Benefit Most
According to the study, on average for recent graduates, here is who will get the most student loan forgiveness following the student loan payment pause:
- Doctors: $50,000 student loan forgiveness
- Lawyers: $29,500 student loan forgiveness
- Master’s degree: $13,500 student loan forgiveness
- Licence: $4,500 student loan forgiveness
- Associate’s degree: $3,500 student loan forgiveness
- Did not complete their degree: $2,000 student loan forgiveness
Cancellation of student loan: disproportionate advantage for doctors and lawyers
Recently graduated doctors and lawyers who haven’t started repaying will benefit the most from the student loan repayment break, according to the study. Why? Physicians typically take out larger student loans — $265,000 on average, according to the study — and therefore pay relatively higher interest on their student loan principal balance. (Student loan payment pause: Senator says extending student loan relief is unfair to most Americans.) In contrast, the average college graduate has student loan debt of $30,000. One problem is that, on average, doctors and lawyers earn more than student borrowers with bachelor’s degrees. This raises the question of whether suspending student loan payments benefits the most struggling student borrowers. That doesn’t mean individual borrowers haven’t saved money from the student loan payment break. On the contrary, the study shows that doctors and lawyers received disproportionately more student loan relief than student borrowers who may earn relatively lower incomes. (Biden could extend the student loan payment break indefinitely.)
Student loan payment break is regressive?
According to the author, the pause in student loan payments is regressive because it benefits high-income individuals with higher student loan balances. (Biden removed the student loan cancellation from the budget). For example, the author notes the breakdown of student loan debt by size:
- $100,000 in student loans: 7% of all borrowers, but 40% of total student debt;
- $200,000 in student loans: 2% of all borrowers, but 17% of total student debt.
In contrast, according to the author, $10,000 of student debt forgiveness would be more evenly distributed among the population of student borrowers. Biden is still considering student loan forgiveness and he backed $10,000 in student loan forgiveness. It is important to note that “student loan cancellation” following the student loan pause is not an outright forgiveness of the student loan. Rather, it is an “effective” forgiveness of student loans through both the cancellation of student loan interest and higher inflation. When Congress passed the Cares Act — the $2.2 trillion stimulus package — Congress temporarily set federal student loan interest rates at 0% with no further accrual of interest. According to the US Department of Education, student borrowers have collectively saved $5 billion per month on their student loans. The Federal Reserve Bank of New York estimates that student borrowers have collectively received $195 billion in savings from the pause in student loan payments.
The student loan payment pause is scheduled to end on August 31, 2022. Democrats are calling for extending student loan relief, while most Republicans oppose any further extensions. Are you ready to resume student loan repayments? Make sure you know all your options. Here are some useful options to save money: