Millions of Americans could see their student debt wiped clean before the end of the summer — or, at least, get some more time to pay back their loans.
On Monday, President Joe Biden told reporters that he is nearing a decision on broader federal student loan forgiveness, according to CNN. Biden also said another extension of the student-loan payment pause, which is set to expire in August, is "on the table." Earlier this month, The Wall Street Journal reported that the White House's decision will likely come in July or August.
White House officials are zeroing in on canceling $10,000 for all borrowers who earn less than $150,000 per year, CNBC reported June 1, but the administration has yet to confirm such plans. A spokesperson for the Department of Education tells CNBC Make It that the department's review of broad-based debt cancellation "remains ongoing" as of Wednesday afternoon.
In the meantime, the administration is continuing its targeted approach to debt relief, focusing on a backlog of cases from defrauded borrowers. On Thursday, the Department of Education announced it will cancel $6 billion in student loans for around 200,000 borrowers who brought a lawsuit against the government in 2019, and who claimed they were misled or defrauded by their former college or university.
A wide-scale student loan cancellation of $10,000 per borrower would forgive a total of $321 billion of federal student loans and eliminate the entire balance for about 11.8 million borrowers, according to the Federal Reserve. The average borrower would receive $8,478 in student loan forgiveness.
That's in addition to the more than $25 billion in loan forgiveness that the Biden administration has approved for about 1.3 million borrowers, including public service employees and defrauded students.
More than 40 million Americans carry student loan debt, and about 25% of those borrowers are in delinquency or default, CNBC reported earlier this month.
The Department of Education's pause on student loan repayment, interest and collections is currently set to expire on Aug. 31, and some experts say an extension is Biden's most likely short-term action. Michelle Dimino, a senior education policy leader at public policy group Third Way, told CNBC Make It on June 2 that she expects the pandemic-era relief policy to be extended yet again through the end of the year.
U.S. Secretary of Education Miguel Cardona and other top Biden officials have made it clear that they are comfortable extending the pause. "We're going to continue to monitor it," Cardona told Cox Media Group in April. "Right now, we have August 31. And as you've seen in the past, we've been comfortable moving that date if needed."
Nearly all borrowers have stopped making their payments since the pause began in March 2020 — and it's saved borrowers about $1.5 billion in interest payments each month, according to an April report from the Financial Health Network, a non-profit financial services organization.
While some politicians and economists have applauded the Biden administration's potential plan as a key step toward addressing the $1.7 trillion student debt crisis, others on Capitol Hill have expressed strong opposition to wide-scale student loan forgiveness.
A third group, which includes Senate Majority Leader Chuck Schumer, D-N.Y., and Sen. Elizabeth Warren, D-Mass., is urging the administration to consider a bolder approach: to cancel at least $50,000 per borrower, which would eliminate the entire balance for close to 30 million borrowers, according to the Federal Reserve.
Biden, however, said that he is "not considering $50,000 in debt reduction" during a speech at the White House in April.
Sign up now: Get smarter about your money and career with our weekly newsletter