New Education Department (ED) data reveals how student loan borrowers would benefit from various levels of debt forgiveness, providing more material for Democratic lawmakers urging President Biden to cancel student debt and setting the stage for a Senate student debt hearing on Tuesday.
The previously unpublished ED data, obtained by Yahoo Finance, found that $50,000 in forgiveness would erase the entire debt burden for 36 million (84%) of the roughly 43 million borrowers holding federally-backed debt while $10,000 in forgiveness would wipe out the debt for 15 million of those borrowers (35%).
The raw information from ED also showed that out of the 36 million student loan borrowers who would benefit from $50,000 in cancellation, 9.4 million — a little more than a quarter — are currently in default. Other borrowers may be at risk of default after a payment pause and debt collection moratorium on qualifying loans ends after September.
"Millions of borrowers will be reentering student loan repayment in October... borrowers are paying hundreds if not thousands of dollars [each month]... on their student debt," student loan startup Summer Co-Founder and CEO Will Sealy recently told Yahoo Finance Live. "I am personally worried about how many millions of borrowers will be at risk of missing loan payments and defaulting on their student debt."
Furthermore, according to ED, there are 4.4 million borrowers — holding $211 billion in debt or an average of nearly $48,000 per borrower— who have had student loans for more than two decades since graduation. Another 10.7 million borrowers, holding $458 million in student debt, have been holding their loans for more than a decade.
The latest ED data is roughly in line with a previous analysis by Yahoo Finance that estimated cancellation would affect roughly $1.3 trillion in outstanding federally-backed loans. The analysis found that $50,000 in forgiveness would erase the entire balances for about 80% of borrowers while $10,000 in forgiveness would wipe out the debt balances for about 36% of those borrowers.
Hearing on Tuesday to look into student loan crisis
Senator Elizabeth Warren (D-MA), chairwoman of the Subcommittee on Economic Policy at the Senate Committee on Banking, Housing, and Urban Affairs, will oversee a hearing on Tuesday about “The Student Debt Burden and Its Impact on Racial Justice, Borrowers, & The Economy.”
Witnesses will include Rep. Ayanna Pressley, who defaulted on her own student debt and has been outspoken about the current system's disproportionate effect on borrowers of color, Massachusetts Attorney General Maura Healey, who supports the call for up to $50,000 in student debt forgiveness, and Navient CEO Jack Remondi.
Navient (NAVI) services federally-backed loans for roughly 5.6 million borrowers, holds an estimated $58 billion in Federal Family Education Loans, and is well known to Warren, attorneys general, and judges across the country.
Warren has been questioning Navient since 2013, back when it was Sallie Mae, “for its repeated failings, including the improper marketing of federal student loans and violations of contractual obligations regarding debt collection.” She has also flagged concerns about ED’s relationship with Navient and repeatedly called on Navient to pay ED $22.3 million that was owed since 2009 (and was asked by ED to refund it in February 2021).
Warren and Senate Majority Leader Chuck Schumer (D-NY) have both repeatedly urged a skeptical Biden to cancel $50,000 in federally-held student loan debt via executive action (as opposed to legislation passed by Congress).
White House Chief of Staff Ron Klain recently told Politico that the president asked Education Secretary Miguel Cardona to "prepare a memo on the president's legal authority" before any decision.
Update: This report was updated with a link to the ED data, which were originally provided to Senator Warren’s office as “Responses to Data Request” and shared after Yahoo Finance reported on the details.
Clarification: An earlier version of this post referred to the information from ED as an "analysis." Given the nature of the underlying document, the term "data" is more precise.
Aarthi is a reporter for Yahoo Finance. She can be reached at firstname.lastname@example.org. Follow her on Twitter @aarthiswami.