Cancel student debt? This graph shows who owes what

Calls to cancel some of the record $ 1.6 trillion in US student loans have risen ahead of a Biden government.

Now that Joe Biden’s victory over President Trump has been certified by the Electoral College, raising hopes that more sustainable debt relief is on the way, here’s a look at who in the US owes the most to federal student loans.

Few people with higher incomes owe most of the student loans

BofA Global, Federal Reserve

Analysts at BofA Global have compiled the accompanying chart, which shows that a relatively small group of less than 3.5 million borrowers owes most of the debt with more than $ 300 billion.

Each borrower in that group owes $ 100,000 to $ 200,000, perhaps after funding medical, business, or law school, while the second-largest category of borrowers, with $ 250 billion in loans outstanding, owes more than $ 200,000 each.

In other words, a small fraction of borrowers owe the big bucks, while most in the US with student debt – 14 million – owe the federal government less than $ 10,000 each for their education.

“The debate over whether the idea of ​​canceling student loans is good (effective) or bad (ineffective) has spanned a wide range of opinions,” BofA’s team of analysts led by Chris Flanagan wrote in a weekly note .

President-elect Joe Biden proposed to forgive at least $ 10,000 in federal student loans per person as part of his emergency action plan to save the economy, as COVID-19 cases have set alarming records.

In September, Democratic Sens. Chuck Schumer (D-NY) and Elizabeth Warren (D-Mass.) Urge next president to immediately cancel up to $ 50,000 in student debt, a proposal that outgoing Education Secretary Betsy DeVos recently called a “ socialist. ” . takeover of higher education. ”

“There are valid arguments on both sides of the debate, but the data shows that a focused approach to forgiveness and / or enhancement of existing forgiveness programs may be the best way forward,” the Flanagan team wrote.

To further illustrate the debt burden, this chart shows that higher-income households owe about 60% of outstanding student debt, and an even greater portion of monthly cash payments.

Households with a higher income are most guilty

BofA Global, The Brookings Institution, Federal Reserve

But the most indebted households with student loans also tend to have the lowest unemployment rates and the highest incomes, “so forgiveness may be better aimed at those with some college or another” or those who haven’t graduated, “the BofA team wrote.

“The focus of any loan forgiveness program is likely to be on borrowers who are struggling to repay loans.”

Read: Should Biden’s administration cancel the student debt? Read this before you decide

In market action on Tuesday, the shares closed near record highs as Wall Street awaited updates from Congress on its bid to produce another pandemic aid and government spending package.

Student moneylender SLM Corp SLM was up 2.5% on Tuesday and 37.7% in the year to date. Navient Corp NAVI rose 2.7% during the session, but was down 30.6% from the year to date Nelnet, Inc.. NNI added 1.1% and 19% this year on Tuesday.

The Dow Jones Industrial Average DJIA,
+ 1.13%
rose 1.1%, or 5.8% in the past year, while the small-cap Russell 2000 index RUT,
+ 2.40%
Tuesday rose 2.4% to record high, up 17.5% so far this year.

Also see: Meet the real face of the student debt crisis

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