Student loan forgiveness: How it might unfold and who might benefit

Forty-five million borrowers are carrying around $1.7-trillion in student loan debt. That's why people like Alan Collinge, who leads a grassroots campaign called Student Loan Justice, say canceling that debt would be a major boost to the economy.

"Younger people aren't able to start families, they're not able to start businesses, and do all the things normal things people do in the course of their lives," he explained.

Democratic leaders in Congress are responding with plans to erase up to $50,000 in student debt per borrow. It’s part of their plan to stimulate the economy, assuming people will spend more money and support more jobs if they don’t have to pay down student loans. 

"Student loans and federal student loans are becoming a forever burden," lamented U.S. Sen. Chuck Schumer.

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If Democrats cannot get the votes they need, Schumer is urging President-elect Biden to do it on his own through executive order. They say a higher-education law from 1965 gives the president the power to forgive student loans without Congress. 

While Schumer says Biden is considering it, Biden has not confirmed that. He has repeatedly said he prefers Congress to erase student loan debt.

And while Democrats in Congress say they want to forgive up to $50,000 per borrower- Biden has called for canceling up to $10k per borrower to help them cover basic expenses.

"It's holding people up; they’re in real trouble. They're having to make choices between paying their student loan and paying the rent, those kind of decisions," he said.

The plan in Congress faces opposition from Republicans who say canceling student loans will effectively shift the burden to all taxpayers and drive up our deficit and national debt. 

"I think getting the economy back working again is the best way of moving forward on how to deal with anyone's debt," Rep. Kevin McCarthy offered.

But if the plan in Congress does pass, or if Biden cancels student loan debt on his own, it likely won’t cover everyone paying student loans. Schumer and Biden have said they only want to forgive loans for people making less than $125,000 a year.

It’s not clear if they would cover all student loans just federal student loans. They could also pay off student loans from private lenders, but that would be complicated, significantly increase costs, and be far more difficult to pass in Congress or survive legal challenges through executive order.

It’s also not clear if the feds would cover graduate student loans or undergraduate loans only.