Biden touted student-debt cancellation for 5 million borrowers. Here’s who benefited, and how.

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Before leaving office, President Joe Biden highlighted his record on student debt forgiveness, pointing out that his administration approved nearly $190 billion in student debt relief for more than 5 million borrowers.

for their loans to be completely forgiven.

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A recent study, released over the weekend, analyzes credit-panel data from a nationally representative sample. The study was led by economists at a nonprofit research group, the Jain Family Institute. The research "contradicts the common claim that student loan forgiveness is mostly a benefit to borrowers with high incomes," according to Marshall Steinbaum, who is a senior fellow at the Jain Family Institute and also an economist at the University of Utah.

Limitations on debt forgiveness only address the question of the amount of debt that can be cancelled, but Steinbaum argues that having more student debt itself is not an indicator of financial well-being.

“He stated that for those whose student loans are cancelled, this is a significant relief for their financial situation. He also emphasized that student debt does not necessarily lead to greater financial security.”

In announcing plans to wipe clean student debt for a big portion of borrowers in 2022, Biden recognized that the original idea of using loans to help people finance their education and improve their financial situations had failed to work out.

The weight of the situation is so great that even after graduating, you may still not be able to achieve the financial stability that a college degree was meant to offer in the middle class.

ruled by the Supreme Court. However, his administration did have success simplifying how borrowers can access existing debt-relief programs that were already on the books when he took office.

Five million borrowers who had their debt relief approved fall into a few distinct categories: They were victims of school scams; worked in public service and made loan payments for at least a decade; were extremely disabled; or had been paying off their loans for twenty years or more.

People who had their loans cancelled between 2021 and 2024 saw a 1.5-percentage-point increase on average in their homeownership rate compared to if their debt hadn't been cancelled. By the third year after cancellation, this increase rose to 8 percentage points. Additionally, their average credit score rose by 19 points, and they took on $756 more in auto debt.

To determine the effects of the cancellation, researchers looked at borrowers who had their loans erased in comparison to a control group that was still paying off their loans. Because the cancellation occurred during a time when student loan payments were on hold due to the pandemic, the researchers wanted to find out what impact the debt forgiveness itself had, rather than the payment pause. So, they compared borrowers who had their debts canceled to another group of borrowers who continued to make payments on either a private or federal student loan during the pause.

They discovered that while all groups benefited from the cancellation, different groups experienced it in varying ways. The credit data doesn't contain information about why borrowers received loan forgiveness, but the timing of the relief offers some insight.

The first group of individuals experienced the largest increase in homeownership after receiving debt cancellation. Due to the timing, it is primarily assumed that this group consisted mainly of borrowers who obtained relief through the borrower defense program, which enables individuals to have their debt forgiven if they were deceived by their schools.

“Lightening their load was still pretty important, even if the amounts of debt being cancelled were probably the smallest,” Steinbaum said. That’s because these borrowers likely weren’t getting a lot of benefits from the job market from their education.

As Donald Trump prepares to take office on Monday, many borrowers and supporters are concerned about the future of these debt cancellation programs. Steinbaum and other experts point out that proposals to limit debt relief would mainly affect new borrowers — meaning that even though there's a lot of debate about student-loan forgiveness, existing borrowers in certain programs are likely to have their debts cancelled in the future anyway.

The data shows that by 2022, over 54% of outstanding student loans had a greater remaining balance than they did when the borrower initially obtained the loan.

"There are still many loans out there that are essentially unlikely to be repaid," Steinbaum said.