How Likely Is Student Loan Forgiveness? And Should You Pause Or Pay Down Your Loans?

The country’s more than 45 million student loan borrowers have gotten a reprieve on their federal loan payments now for nearly a year. And one of President Joseph Biden’s first actions in office was to extend that pause on federal student loan payments through September.

Biden’s executive action, which was signed on his first day in office last week, means federal student loan payments and collections will be paused through September and the interest rate will be kept at 0%. “Too many Americans are struggling to pay for basic necessities and to provide for their families,” he said. “They should not be forced to choose between paying their student loans and putting food on the table.”

If you’re not in that situation, though, does it make sense to take advantage of the temporary 0% interest rate to try and pay down your student loan balance even faster? Or is it worth waiting to see if some of those loans might be forgiven? President Biden has proposed the cancellation of $10,000 in federal student debt per borrower. But how likely is it that student loan debt forgiveness will actually happen in the coming months? And is it possible that federal student debt forgiveness could cover an even larger amount, as some have advocated? We tackle these questions below.

How Likely is Federal Student Debt Forgiveness in the Short Term?

The president’s outline for the $1.9 trillion proposed stimulus package, which he unveiled this month, has no mention of cancelling student debt. But the president has said he still supports $10,000 in forgiveness per federal student loan borrower. And the push for some student loan forgiveness has been gaining momentum, at least among Democrats, who hold the majority in Congress. So the likelihood that some form of debt forgiveness will be put into place is relatively high. But when that may happen, who will qualify, and how much will be forgiven, is less clear.

Higher education expert Mark Kantrowitz, publisher and VP of research for, says the $10,000 in loan forgiveness is “more likely to occur than not,” but he cautions that it is not yet a done deal. “And even if it happens, it may get scaled back in various ways, such as limiting eligibility to borrowers who were experiencing financial distress, limiting eligibility to low-income borrowers or borrowers with a high debt-to-income ratio, or to borrowers who owe less than $10,000.”

Forgiveness may also be limited to borrowers with federal loans held by the U.S. Department of Education, just like the payment pause and interest waiver, which would excludes some federal student loan borrowers. (The current payment pause and interest rate of 0%, for example, covers federal Direct Loans, FFEL Program loan, Federal Perkins Loan and defaulted HEAL loans, but only if they are loans owned by U.S. Department of Education.)

But pressure to offer some student loan forgiveness is mounting. Student loan borrowers now owe nearly $1.7 trillion altogether and student debt was a hot topic during the campaign. In a recent Morning Consult poll, 56% of adults say they strongly or somewhat support the $10,000 student loan forgiveness plan Biden endorsed during his campaign. Biden has continued to urge Congress to pass legislation cancelling $10,000 in federal student loan debt. It’s unclear whether there would be enough GOP support, though, to pass bipartisan legislation.

How Could Democrats Pass Student Loan Forgiveness?

In a recent op-ed column, Sen. Bernie Sanders (I-VT), who is the incoming chairman of the U.S. Senate Budget Committee, urged Congress to use the budget reconciliation process if Republicans are unwilling to pass such bipartisan legislation.

Typically, the Senate has a 60-vote threshold to pass major legislation, but the so-called budget reconciliation process allows lawmakers to pass comprehensive legislation with just 51 votes. Budget reconciliation was created under the Congressional Budget Act of 1974 and allows the use of reconciliation for legislation that changes spending, revenues, and the federal debt limit. 

The process has been used in the past to speed up high-priority fiscal legislation. During the administrations of Donald Trump and George W. Bush, Sanders noted, Republicans used the budget reconciliation process to pass “trillions of dollars in tax breaks.” According to the Center on Budget and Policy Priorities, policymakers have enacted 21 budget reconciliation bills since 1980.

“I do think that if relief cannot be achieved through bipartisan means, that Democrats will attempt to realize it through reconciliation, at which point their chances of success will dramatically improve,” says Tim Stobierski, founder and editor of the student borrower resource site Student Debt Warriors.

It appears that Democratic Congressional leaders are setting the stage to kick off the budget reconciliation process in the coming days, but it’s not clear if student loan forgiveness will be included in the legislation.

What About the $50,000 Student Loan Forgiveness Proposal?

Senate Majority Leader Chuck Schumer (D-NY) last month called for cancelling up to $50,000 in debt for federal student loan borrowers who make less than $125,o00 a year—and urged President Biden to use his executive authority to do so. A move that’s also been promoted by Sen. Elizabeth Warren (D-MA). Schumer made news again this week when he repeated his call to #cancelstudentdebt on Twitter with a tweet that garnered nearly 130,000 likes in less than a day.

Supporters like Schumer and Warren say the Higher Education Act of 1965 empowers the U.S. Secretary of Education to cancel student loans without further authorization from Congress. Biden, however, has repeatedly indicated that he prefers Congress to pass legislation to cancel student loans.

Kantrowitz estimates that offering $10,000 in forgiveness per borrower for all federal student loan borrowers would cost about $377 billion, whereas forgiving $50,000 in debt for all borrowers will cost $1.049 trillion.

While lawmakers discuss options, the pause through September will offer some interim relief to federal student loan borrowers.

What the Extended Pause on Student Loan Payments Means

President Biden’s executive action to extend the pause on student loan payments means that federal student loan borrowers whose debt is owned by U.S. Department of Education can hold off on making any payments through September, and will not be charged a penalty or accrued interest. (If you have federal student loan debt that’s owned by your school or another lender, you can reach out to them directly. They can choose to provide the same benefits. You can also consolidate any FFEL Program or Federal Perkins loans not owned by ED into a Direct Consolidation Loan, which would be eligible for 0% interest.)

It also means that any payments made would go directly toward paying down the principal owed. Kantrowitz cautions, though, that before deciding whether to accelerate repayment of loans that are eligible for the payment pause and interest waiver, borrowers should be sure they have built up their emergency funds in the event that they lose their job.

He also advises not to make payments on your federal student loans during this period if you expect to receive loan forgiveness through the Public Service Loan Forgiveness program or at the end of the 20- or 25-year repayment term in an income-driven repayment plan. Making extra payments would just reduce the amount of forgiveness you’ll eventually receive. 

But if you’ve got enough savings to cover expenses for a few months, you’ve got more than $10,000 in federal student loan debt, and you don’t have debt with a higher interest rate you could focus on paying down instead, it may make sense to take advantage of the 0% interest period to make payments on your principal. That means the amount you borrowed will decrease faster, and you’ll pay less overall over time.

And September is seven months away, giving lawmakers plenty of time to debate—and potentially pass—some student loan forgiveness legislation.