$10,000 in Student Loan Forgiveness Could Cancel Federal Debt for 1 in 3 Borrowers
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 LendingTree 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.
LendingTree 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: LendingTree 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.
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: LendingTree 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: LendingTree 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
Using data from the U.S. Department of Education as of Dec. 31, 2021, analysts calculated the loan-size distribution of directly owned federal loans, which the government would potentially be able to write off.
The Education Department reports the balance distribution of all federal loans for each state and the total number of borrowers and total balances of directly held loans.
Analysts assume that the difference between all federal and directly held loans was proportional across balance distribution. The amount that would be potentially forgiven in each state is the sum of borrowers with balances over $10,000 multiplied by $10,000, plus the total amount outstanding for borrowers who owe less than $10,000.