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President Joe Biden, congressional leaders and debt experts continue to argue over student loan debt forgiveness — both how much should be canceled and which branch can offer relief. Biden told a questioner at last week’s CNN town hall he did not think he had the authority to cancel $50,000 for student loan borrowers, and instead would limit relief to $10,000. Earlier, the administration had said it was reviewing its options for forgiveness through executive action. Even the more modest figure of $10,000 per student would represent one of the most ambitious projects under the new administration, erasing an estimated $377 billion in debt.

Student debt forgiveness is popular among voters, but a handful of economists have questioned whether it helps those most in need. They argue that middle-class families will benefit more than poor and marginalized Americans.

There are many ways to look at the types of people loan forgiveness would benefit: Should we consider household income? What about net wealth? How would borrowers of different races be affected? A Hechinger analysis of federal data provides additional dimensions to the picture of student debt. We show more detail about where student debt falls most heavily and how different cancellation plans would affect different groups of Americans.

First, here is the overall picture of student loan debt and its rapid growth.

Americans amassed trillions of dollars in student loan debt in the course of just a few decades. Throughout most of the Department of Education’s life as a guarantor of loans and a direct lender, student borrowing remained below $20 billion per year, according to a 1998 report from the Institute for Higher Education Policy. That shifted with the 1992 reauthorization of the Higher Education Act. Among several changes, it created an unsubsidized lending program that offered less attractive terms than subsidized loans, but was open to students from all income levels. Borrowing lurched above $30 billion by the 1996-97 academic year.

Related: PROOF POINTS: Is forgiving college debt the best way to solve the student loan crisis?

As of November, total outstanding student loan debt was $1.55 trillion, according to the Federal Reserve Bank of New York. New lending remains around $100 billion per year, the biggest share of which is unsubsidized Stafford loans, according to College Board data.

The 1998 report also revealed that middle- and upper-class households drove most of the increase in undergraduate borrowing. The somewhat counterintuitive fact that affluent folks make up a large portion of borrowers — considering that they seem best positioned to attend college without loans — is what worries some economists about forgiveness programs.

Adam Looney of the University of Utah wrote that $50,000 forgiveness plans like that of Sens. Chuck Schumer and Elizabeth Warren would give unnecessary relief to “borrowers with the ability to repay,” while Sandy Baum of the Urban Institute called universal cancellation “not a progressive policy” since the relief would go only to those that attended college and leave out many low-income households.

It is true that broad cancellation would forgive more dollars of debt for middle- and high-income families. (In general, higher-income households borrow more than lower-income households across almost every category of credit, according to data from the Federal Reserve.) But this obscures the fact that it is households with the least wealth, not affluent families, that borrow most frequently and at the highest balances. The Federal Reserve tracks households by percentiles based on their net assets, a calculation of wealth that balances assets such as home values against liabilities such as student debt. Households in the bottom quarter of net assets are accumulating student loan debt faster than any other group. The median student loan debt of these households has rocketed above $30,000.

Even if these borrowers go on from college to middle-class jobs, they can still be burdened by debt. “There are some folks who have what is considered a high income who have no wealth to show for it,” said Ashley Harrington, federal advocacy director for the Center for Responsible Lending, which supports a $50,000 student loan forgiveness plan. “They actually are unable to build wealth because of student debt and because of systemic inequities.”

This is especially true among Black borrowers, who are overrepresented among debt-holding U.S. households and who face barriers to building wealth in other areas, such as discrimination in the housing market.

Calculating where dollar amounts of relief would accrue also glosses over the fact that debt is more costly — even ruinous — lower down the income scale. For instance, researchers have found that late payments and delinquencies spike around the $2,000 level in loan balances, likely because many of these borrowers began but did not complete a degree program. Bad marks in a credit report, even for small balances, add more to the cost of other types of credit over an individual’s lifetime, according to Harrington, making the financial impact much larger than the dollar value of the original loan.

Defaults also affect some households more than others. Research by Judith Scott-Clayton of Teachers College, Columbia University found that nearly half of Black borrowers that enrolled in college in the 2003-04 academic year had defaulted within 12 years. (The Hechinger Report is an independent news organization located at Teachers College.)

Some economists propose that instead of issuing widespread student loan debt forgiveness, the government should strengthen existing income-driven repayment plans, which forgive the balance of the debt after a period of up to 25 years. However, some borrowers have difficulty navigating the process of enrolling — if they are aware of these programs at all. Many participants also see their balances balloon at the beginning, when their incomes are low.

The Congressional Budget Office estimates that, for those taking out college loans in the 2020s, 21 percent of undergraduate and 56 percent of graduate student loan debt will eventually be erased through forgiveness. But until that point, the debt will remain on their credit scores.

Related: Do income-based repayment plans drive young borrowers of color deeper into debt?

“Even people in good standing are getting hammered,” said A. Wayne Johnson, a former Department of Education official who served as the chief operating officer of the Office of Federal Student Aid under Education Secretary Betsy DeVos. Johnson supports a $50,000 universal forgiveness package that he says would wipe out the debt of roughly 84 percent of federal student loan borrowers. He would also like to see a policy that removes any associated negative marks from Americans’ credit histories. “Then they’d be able to rent apartments, get jobs and maybe even buy houses,” he said.

Regardless of whether debt forgiveness becomes a reality, changes to student lending, such as capping loan limits or converting some programs to grants, will be necessary to curb the growth in student debt going forward. Advocates on both sides of the cancellation debate see the need for higher education reform in general, from regulations on for-profit schools, whose graduates default at higher rates than those of public colleges, to policies intended to lower the costs of public two- and four-year schools.

“We haven’t allowed the investment to keep up with college,” said Harrington, who pointed out that Pell, the grant program designed to aid low-income college-goers, covers an ever-shrinking portion of costs. “Folks have been forced to rely on debt.”

This story about student debt forgiveness was produced by The Hechinger Report, a nonprofit, independent news organization focused on inequality and innovation in education. Sign up for our higher education newsletter.

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At The Hechinger Report, we publish thoughtful letters from readers that contribute to the ongoing discussion about the education topics we cover. Please read our guidelines for more information. We will not consider letters that do not contain a full name and valid email address. You may submit news tips or ideas here without a full name, but not letters.

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  1. What is almost never discussed in this student loan debt debate is what student loans are actually used for. Reading all the news about it, it is natural to assume it is all an investment in higher education education related expenses. However, having worked in financial aid for almost 20 years I can attest that approximately 2/3 of all borrowing, particularly graduate level borrowing, where there are no loan caps, and which comprises over half of all the dollars in the federal student loan portfolio, is for “room and board” – costs outside of tuition and fees and in the world of distance education, often have nothing to do with the school or the education at all. This is an important distinction as we try to decide how to reform student lending, hold schools accountable and talk about how much to cancel.

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