Biden Proposes Free Tuition — But Is Student Loan Forgiveness Dead?

"It could happen this year but it’s not going to be tomorrow," says Mark Kantrowitz, a leading national student loans expert.

Advocates say widespread loan forgiveness would give consumers some much-needed financial breathing room to save for their futures, buy a car or jump on the property ladder by purchasing their first home at today’s bargain mortgage rates.

Biden pushes free tuition, others push for debt relief

While Biden made no mention of student debt forgiveness in his congressional address, he did present several proposals that could lessen the amount of college debt taken out by students in the future.

The $1.8 trillion "American Families Plan" he unveiled includes two years of free community college and increases the maximum federal financial aid award by around $1,400, to provide additional assistance to low-income students.

It also increases funding to historically Black colleges and universities, and other institutions serving Hispanic, Asian and native populations.

Meanwhile, Democrats and advocacy groups continue to push hard for Biden to use his executive authority to cancel roughly $1 trillion in outstanding federal student loans, up to $50,000 per person.

That would completely relieve the burden for 36 million people — or 84% of all borrowers, according to U.S. Department of Education data supplied to Massachusetts Democratic Sen. Elizabeth Warren.

Billions in help is already available

Some argue that the White House has already offered abundant student debt relief.

The administration has so far forgiven $2.3 billion in student loans, giving many borrowers more room in their budgets to save or invest.

And, the COVID relief bill Biden signed last month — the one providing $1,400 stimulus checks — included a provision making canceled student loans tax-free until 2026. Normally, forgiven debts are taxed as income.

The administration also has extended a nationwide pause on student loan payments and interest through September. That benefit, Kantrowitz notes, effectively amounts to debt forgiveness.

"The cost of it is a little bit less than $5 billion a month in forgone interest," he says, citing an Education Department report. "It’s a very substantial amount of money."

Biden awaits a decision on canceling debt

Biden has said he’d be willing to cancel $10,000 in student debt per person but that forgiving five times as much through an executive order is more complicated. The president has asked his education secretary, Miguel Cardona, to look into whether that's something that could be done without approval from Congress.

Kantrowitz, the author of the book How to Appeal for More Financial Aid, says the answer is likely to be a resounding no.

"If by some magical twist they were to decide, yes, he can, it would be met with litigation, especially at $50,000 because that’s a trillion dollars," he says.