While on the campaign trail, not-yet President Joe Biden tweeted , “Additionally, we should forgive a minimum of $10,000/person of federal student loans, as proposed by Senator Warren and colleagues. Young people and other student debt holders bore the brunt of the last crisis. It shouldn’t happen again.”
At a virtual summit on student loan debt, Senate Majority Leader Chuck Schumer Senate called for President Joe Biden to forgive $50,000 in student debt through executive action for all borrowers.
The U.S. Department of Education has said $50,000 student loan cancellation would take care of 36 million individuals’ loans and put a dent in the student loan debt that currently sits at about $1.5 trillion. Student loans represent the second largest portion of household debt after mortgages — more than credit card debt. About 43 million Americans have student loans.
At this point, the White House and Congress have not enacted legislation for $50,000 student loan forgiveness. In this piece, we’ll touch on $50,000 student loan forgiveness, preexisting forgiveness programs, and other ways to pay for school.
Is the $50,000 Student Loan Forgiveness Program Real?
Currently, no widespread federal student loan forgiveness order exists to wipe out student loans. Schumer and Elizabeth Warren, senior United States senator from Massachusetts, believe that one-time student loan forgiveness could relieve students of their debt burden as well as potentially:
• Reduce wealth gaps, including racial wealth gaps
• Help those without a degree who have lower lifetime earnings but owe on student loans
• Economically stimulate the middle class
• Increase home purchases and stimulate small businesses
• Help more people save for retirement and start a family
• Boost the economy
In April of 2021, President Biden asked the U.S. Department of Education to see if his executive authority gives him the ability to order student loan forgiveness without the approval of Congress.
Who Qualifies for $50,000 Student Loan Forgiveness?
Right now, nobody qualifies for $50,000 student loan forgiveness because a blanket forgiveness order hasn’t come from the Biden administration or Congress. That’s not without pressure from progressive Democrats, who have repeatedly asked the president to issue an executive order for $50,000 student loan forgiveness.
Instead, the administration has been focusing on already-established student loan forgiveness programs , including approving $1.5 billion in borrower defense claims and providing $7.1 billion in relief for borrowers eligible for total and permanent disability discharges. This includes $5.8 billion in automatic student loan discharges to 323,000 borrowers and the reinstatement of $1.3 billion in loan discharges for another 41,000 borrowers.
Is the $50,000 Student Loan Forgiveness for Private Lenders?
If a $50,000 student forgiveness legislation came to fruition, the measure would likely only apply to federal student loans. Those with private student loans would still have to continue making their payments unless individual private student loan companies make changes to authorize student loan forgiveness.
An income threshold may also go into effect. In that case, the amount of forgiveness you could hypothetically receive would depend on how much money you make. If you make more than what federal guidelines suggest, you may face restrictions on the $50,000 threshold.
Can the Government Forgive $50,000 in Student Loan Debt?
Warren says that the president has the power to take care of $50,000 of student loan debt with the flick of a pen. However, Biden does not plan to support Warren’s and Schumer’s calls for action, nor does Speaker Nancy Pelosi believe Biden can unilaterally make that call on his own.
In a town hall meeting a few weeks after he took office, a citizen asked about the possibility of $50,000 student loan forgiveness. Biden said in no uncertain terms that he did not support the idea.
Preexisting Forgiveness Programs for $50,000 Student Loan Debt
So, if $50,000 in loan forgiveness isn’t an option, what are the possibilities? Several loan discharge options might be available to you. Loan discharge means you no longer have to repay your loan as long as you meet certain requirements. Let’s walk through Total and Permanent Disability (TPD) Discharge, Closed School Discharge, and Public Service Loan Forgiveness (PSLF). Keep in mind that these forgiveness programs only apply to federal student loans.
Total and Permanent Disability Discharge
A Total and Permanent Disability (TPD) Discharge absolves you of having to repay a few types of federal loans or grants:
• William D. Ford Federal Direct Loan (Direct Loan) Program loan
• Federal Family Education Loan (FFEL) Program loan
• Federal Perkins Loan
• TEACH Grant service obligation
You must complete and submit a TPD discharge application and documentation from one of these three sources: the U.S. Department of Veterans Affairs (VA), the Social Security Administration (SSA), or a doctor.
Closed School Discharge
Closed School Discharge means that you may be eligible for discharge of your federal student loan if your college or career school closes during or soon after you leave it.
You may qualify for a percent discharge of the following types of loans:
• William D. Ford Federal Direct Loan (Direct Loan) Program loans
You may qualify if you were enrolled when your school closed or you were on an approved leave of absence during the period when your school closed. You may also qualify if your school closed within 120 days after you withdrew (as long as your loans were first disbursed before July 1, 2020) or your school closed within 180 days after you withdrew (as long as your loans were first disbursed on or after July 1, 2020).
Public Service Loan Forgiveness (PSLF)
The Public Service Loan Forgiveness (PSLF) program forgives the remaining balance on Direct Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan. You must work full-time for a qualifying employer (a U.S. federal, state, local or tribal government, or nonprofit organization) in order to qualify for PSLF.
Other Ways to Pay for School
Let’s explore the various options available to you, rather than waiting for the government to help out with relief that might not come. It may be helpful to know the differences between grants vs. scholarships vs. loans.
Private Student Loans
Just like federal student loans, you can use private student loans to pay for college or career school costs, but they come from a bank, credit union or online lender — not the federal government.
Generally speaking, federal grants and loans should be prioritized before you take on private loans because you’ll usually pay higher interest rates for private student loans. The amount you can borrow depends on the cost of your degree as well as personal financial factors (such as your credit score and income). Private lenders also aren’t required to offer the same borrower protections and benefits as federal lenders — things like income-driven repayment plans or the forgiveness options discussed previously.
Recommended: Private vs. Federal Student Loans
You can use a credit card to pay for books or other school supplies but your college or university bursar’s office may or may not let you pay for college tuition with a credit card. Speak with the bursar’s office to find out whether it’s possible to pay using a credit card as well as the fees you’ll incur to pay using this method.
Paying for college costs with credit cards carries some added risks. For example, fees from the bursar’s office may outstrip any rewards you earn. It’s also highly likely that you’ll pay more in interest on a credit card than you would with a student loan.
Using a credit card will also disqualify you from the perks of federal student loans — repayment plans, deferment, and the forgiveness programs listed above.
Borrow from Loved Ones
Will a trusted family member or close friend allow you to borrow from them? If so, you could rely on them to lend you money when you need money for school. However, this option can have both positive and negative consequences, the most negative being that you might tarnish your relationship with the individual who loans you the money.
Before you borrow from a loved one, set clear expectations, establish a realistic repayment plan, discuss what happens when you can’t make payments, draw up a formal contract and examine the tax implications for the other party when lending money.
You may also want to suss out the other party’s ability to loan you the money as well. If you think it’ll put the other person in a financial bind, you may want to consider alternative options.
Do you or your parents have money set aside for you to attend college? This is one of the best ways to pay for college because you don’t have to pay interest on borrowed money. You can tap into money that’s earmarked for college or pull from monthly earnings as well.
So far, $50,000 student loan forgiveness is not an option available to federal student loan borrowers. There are some options currently available, such as Public Service Loan Forgiveness, which requires borrowers to make 120 qualifying payments while working for an eligible employer — such as one in the nonprofit sector.
If you’re looking for options beyond federal student loans to pay for college, private student loans may be an option to consider. SoFi’s private student loans make paying for your undergraduate or graduate education easier. You can receive up to 100% of school costs, including tuition and food, books, supplies, room and board, and other education expenses for your undergraduate, graduate school, MBA, and/or law school education. Specific undergraduate loans and graduate loans are available from SoFi.
Check out some FAQs for student loan forgiveness $50,000:
Can the President forgive $50,000 student loan debt?
It’s unlikely that President Joe Biden will unilaterally forgive $50,000 of student loan debt for every borrower. In fact, he stated in a town hall in February 2021 that he doesn’t think he “has the authority” to cancel $50,000 per borrower. House Speaker Nancy Pelosi has also flatly stated that he cannot do it, either.
What are ways to pay off $50,000 in student loan debt?
There are many ways to pay off $50,000 in student loan debt, including paying off student loans one month at a time through monthly payments. However, you can also look into loan forgiveness programs like the ones listed above or income-driven repayment plans. You can also put more money toward your student loans by making more than the required monthly payment each month.
You can target specific loan-payoff methods, including the debt avalanche or debt snowball methods. The debt snowball method means you pay off the lowest amount of money you owe. For example, if you have three student loans, worth $1,000, $2,000, and $3,000, you’d pay off the lowest amount first because you can more quickly pay it off.
The debt avalanche method means you pay off the loan with the highest interest rate first.
It’s also important to remember that student loan forgiveness is not completely free. It’ll affect your taxes. Here’s how:
Let’s say that a federal mandate does materialize and cancels $10,000 worth of student loans. The money from the $10,000 student loan forgiveness program would get added to your taxable income, under what’s called Cancellation of Debt (COD) income. You would also receive Form 1099-C.
When you do your taxes, you’d report $10,000 as COD income and you’d owe based on your individual tax bracket. If you’re in the 22% tax bracket, you’ll pay $2,200 in taxes ($10,000 x 22%).
Do private lenders offer $50,000 student loan forgiveness?
No, private student loan lenders do not offer $50,000 student loan forgiveness but you may be able to explore different payment options with your lender. Talk to your private loan lender if you’re having trouble making your monthly payments.
Student loan lenders want to work with you to give you the best possible options for paying off your loans, but don’t expect to receive $50,000 student loan forgiveness automatically from private lenders.
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