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Federal Student Loan Debt Cancellation: Policy Considerations. CRS Report R47196, Version 5

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Title: Federal Student Loan Debt Cancellation: Policy Considerations. CRS Report R47196, Version 5
Language: English
Authors: Hegji, Alexandra, Shohfi, Kyle D., Zota, Rita R., Library of Congress, Congressional Research Service (CRS)
Source: Congressional Research Service. 2022.
Availability: Congressional Research Service. Web site: https://crsreports.congress.gov/
Peer Reviewed: N
Page Count: 57
Publication Date: 2022
Intended Audience: Policymakers
Document Type: Reports - Evaluative
Education Level: Higher Education
Postsecondary Education
Descriptors: Federal Legislation, Student Loan Programs, Student Financial Aid, Debt (Financial), Loan Repayment, Federal Aid, Educational Legislation, Higher Education, Taxes, Accountability
Laws, Policies and Program Identifiers: Federal Direct Student Loan Program, Elementary and Secondary Education Act Title IV
Abstract: Outstanding federal student loan debt exceeds $1.6 trillion and is owed by approximately 45 million borrowers. Thus, a policy to broadly cancel federal student loan debt would directly apply to a discrete segment of the U.S. population. Cancelling some amount of federal student loan debt would alleviate loan repayment burdens for qualifying borrowers, but depending on the policy design and individual borrower circumstances, borrowers may experience different levels of relief, possibly resulting in different effects on their personal finances. Broad-based student loan cancellation would have significant implications for the federal budget. A primary determinant of the cost to the government would be the total amount of student loan debt to be cancelled. Other cost determinants would include how the loan cancellation policy was to be effectuated, associated administrative costs, and borrower behavior. Cancelling federal student loan debt may have implications for the federal student loan system. Loan cancellation, particularly a one-time cancellation effort, might not address underlying issues relating to unmanageable amounts of student loan debt. Some recent research suggests that policies to provide across-the-board loan cancellation may result in higher-income households receiving a higher share of loan cancellation benefits than lower-income households in terms of total dollar amounts cancelled and savings in annual debt service payments. Other research, examining potential effects on wealth inequality, shows mixed evidence on the potential effects of student loan cancellation. Some original analyses presented in this report to complement existing research focus on longitudinal data from a 12-year follow up on the cohort of borrowers who started postsecondary education in academic year 2003-2004. These analyses suggest that certain groups of borrowers (Black, American Indian, and lower income Title IV student loan borrowers) have made less progress in paying down the original principal amount of their student loan debt when compared with borrowers of other races or ethnicities or household income levels. Among other findings, these analyses also suggest that individuals who borrowed larger amounts were less likely to have made progress in paying down the original principal amount borrowed than borrowers with lower principal amounts. These analyses also suggest that while 26% of borrowers had no remaining loan balance, among those with outstanding loans a large share (60%) had an outstanding balance greater than 90% of the original amount borrowed.
Abstractor: As Provided
Entry Date: 2022
Accession Number: ED622540
Database: ERIC
FullText Text:
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  Data: Federal Student Loan Debt Cancellation: Policy Considerations. CRS Report R47196, Version 5
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  Data: Congressional Research Service. Web site: https://crsreports.congress.gov/
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  Data: <searchLink fieldCode="DE" term="%22Federal+Legislation%22">Federal Legislation</searchLink><br /><searchLink fieldCode="DE" term="%22Student+Loan+Programs%22">Student Loan Programs</searchLink><br /><searchLink fieldCode="DE" term="%22Student+Financial+Aid%22">Student Financial Aid</searchLink><br /><searchLink fieldCode="DE" term="%22Debt+%28Financial%29%22">Debt (Financial)</searchLink><br /><searchLink fieldCode="DE" term="%22Loan+Repayment%22">Loan Repayment</searchLink><br /><searchLink fieldCode="DE" term="%22Federal+Aid%22">Federal Aid</searchLink><br /><searchLink fieldCode="DE" term="%22Educational+Legislation%22">Educational Legislation</searchLink><br /><searchLink fieldCode="DE" term="%22Higher+Education%22">Higher Education</searchLink><br /><searchLink fieldCode="DE" term="%22Taxes%22">Taxes</searchLink><br /><searchLink fieldCode="DE" term="%22Accountability%22">Accountability</searchLink>
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– Name: Abstract
  Label: Abstract
  Group: Ab
  Data: Outstanding federal student loan debt exceeds $1.6 trillion and is owed by approximately 45 million borrowers. Thus, a policy to broadly cancel federal student loan debt would directly apply to a discrete segment of the U.S. population. Cancelling some amount of federal student loan debt would alleviate loan repayment burdens for qualifying borrowers, but depending on the policy design and individual borrower circumstances, borrowers may experience different levels of relief, possibly resulting in different effects on their personal finances. Broad-based student loan cancellation would have significant implications for the federal budget. A primary determinant of the cost to the government would be the total amount of student loan debt to be cancelled. Other cost determinants would include how the loan cancellation policy was to be effectuated, associated administrative costs, and borrower behavior. Cancelling federal student loan debt may have implications for the federal student loan system. Loan cancellation, particularly a one-time cancellation effort, might not address underlying issues relating to unmanageable amounts of student loan debt. Some recent research suggests that policies to provide across-the-board loan cancellation may result in higher-income households receiving a higher share of loan cancellation benefits than lower-income households in terms of total dollar amounts cancelled and savings in annual debt service payments. Other research, examining potential effects on wealth inequality, shows mixed evidence on the potential effects of student loan cancellation. Some original analyses presented in this report to complement existing research focus on longitudinal data from a 12-year follow up on the cohort of borrowers who started postsecondary education in academic year 2003-2004. These analyses suggest that certain groups of borrowers (Black, American Indian, and lower income Title IV student loan borrowers) have made less progress in paying down the original principal amount of their student loan debt when compared with borrowers of other races or ethnicities or household income levels. Among other findings, these analyses also suggest that individuals who borrowed larger amounts were less likely to have made progress in paying down the original principal amount borrowed than borrowers with lower principal amounts. These analyses also suggest that while 26% of borrowers had no remaining loan balance, among those with outstanding loans a large share (60%) had an outstanding balance greater than 90% of the original amount borrowed.
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  Data: ED622540
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      – Text: English
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        PageCount: 57
    Subjects:
      – SubjectFull: Federal Legislation
        Type: general
      – SubjectFull: Student Loan Programs
        Type: general
      – SubjectFull: Student Financial Aid
        Type: general
      – SubjectFull: Debt (Financial)
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      – SubjectFull: Loan Repayment
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      – SubjectFull: Federal Aid
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      – SubjectFull: Accountability
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      – SubjectFull: Federal Direct Student Loan Program
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      – SubjectFull: Elementary and Secondary Education Act Title IV
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