Who Is Impacted by Student Loan Forgiveness and How?

The 2021 SIPP data show that the plan to reduce student loans by $10,000 would completely wipe out balances for 29.0% of those with student debt and that certain demographic groups would benefit more than others.

Some of the largest reductions are expected among Hispanic individuals with an associate degree. A $10,000 reduction in student loans reduces the percentage with any student debt from 14.4% to 7.7%.

While the estimated erasure of student loans is largest for non-Hispanic associate degree holders who are Black alone (identified as Black through the rest of this story) — from 19.9% to 12.6% — this reduction is not statistically different from the reduction for any other race-by-education group.

Because student debt burden is sometimes high relative to income, student loans can go hand in hand with other types of unsecured debt. This means student loan forgiveness is expected to have a significant impact on individuals’ overall unsecured debt burden.

Unsecured debt — such as student, credit card or medical debt — is not backed by an asset the way a house backs a mortgage because lenders cannot repossess someone’s education if the individual fails to pay a student loan.

The $10,000 reduction in student debt would decrease the amount of total unsecured liabilities owed by 33.0% on average of those who have any student debt.

Hispanic individuals with a high school degree but no college degree (43.2%) and associate degrees (38.4%) are expected to experience among the greatest reduction in what they owed in unsecured loans. Non-Hispanic individuals who are neither White nor Black with a high school degree, but no college degree (51.7%) and associate degrees (52.2%) are also expected to experience among the greatest reduction of unsecured amounts owed.

The strength of SIPP data — and survey data more generally — does not lie in estimating the total number of borrowers whose student debt will be eliminated entirely or the total dollar amount of outstanding student debt that will be relieved. 

Rather, the strength of SIPP data is its rich description of who will benefit and how much of a difference student loan forgiveness might make in the context of student loan borrowers’ assets and other debts.

In addition, SIPP returns to interview the same individuals over the course of several years. 

Consequently, future SIPP data will show how student loan forgiveness affected sample members’ student loan balances as well as any subsequent influences on their family formation, business formation, program participation and well-being (financial or otherwise).

SIPP does not ask borrowers whether their student loans are federal or private. Estimates from other sources are that private student loans made up less than 15% of total student debt in 2012. As a result, this research assumes all student loans are federal and this assumption tends to bias the impact on debt burden upwards.

SIPP does not collect information about Pell grant recipients, who would get up to a $20,000 debt relief on federal student loans. This research assumes student debt reduction of no more than $10,000, which tends to bias the impact on debt burden downwards.

We are unable to determine the overall value of the counteracting effects from the above assumptions.

SIPP is a nationally representative, longitudinal survey administered by the Census Bureau that provides comprehensive information on the dynamics of income, employment, household composition and government program participation.

More information about SIPP data quality is available on the SIPP’s Technical Documentation page.