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On August 24, 2022, the Biden Administration announced it would cancel up to $20,000 of federal student debt for certain borrowers. Borrowers with incomes less than $125,000 for single tax filers or $250,000 for joint filers are eligible for cancellation. Borrowers who received Pell grants at some point are eligible to have their debts cancelled up to $20,000, and all other borrowers are eligible to have $10,000 cancelled.
We use administrative Chase banking and credit bureau data on 200,000 student debt holders to estimate how the benefits of this cancellation program might be distributed by household income and borrower race and ethnicity.1
We find that:
- Up to 34 percent of all debt is eligible to be cancelled, or $549 billion out of a total of $1.62 trillion in outstanding federal debt.
- For every dollar of cancellation received by households in the top 40 percent of the income distribution (more than $76,000), households in the bottom 40 percent (less than $52,000) receive $0.68. This assumes all borrowers between $125,000 and $250,000 in income are dual filers, which our data suggest is true for the vast majority of borrowers in this income range. If we assume instead that all borrowers in this range are single filers, then lower-income households receive $1.22 in cancellation for every dollar received by higher income households.2
Figure 1: Higher income households receive slightly more cancellation dollars, but lower income households are more likely to have their debt fully cancelled.
- Lower income households are more likely to have their debt fully cancelled, primarily because lower income households tend to hold less debt relative to higher income households.
- Average debt cancelled for all income groups is between $8,800 and $10,000 (see Figure 2). Lower income households are slightly more likely to have been Pell recipients, but less likely to have outstanding debt larger than $10,000.
Figure 2: Average debt cancelled among those receiving cancellation is between $9,000 and $10,000 across the income spectrum, but relatively higher for Black households.
- The average Black household with debt receives roughly $11,000 in cancellation, while the average Hispanic and White households receive $9,500 and $9,000, respectively.
- The average Black household benefits relatively more from cancellation because Black households hold more student debt relative to their share of the population. The average Black household in the United States will receive 2.5 times as much cancellation as the average White household (see Figure 3). The distribution of cancellation dollars roughly follows the distribution of debt holdings (see Figure 4).
Figure 3: Black and Hispanic households receive more cancellation relative to their population share.
Figure 4: The distribution of cancellation dollars by race and ethnicity is proportional to the distribution of debt held by each group.
Cominole, M., Ritchie, N.S., & Cooney, J. (2020). 2008/18 Baccalaureate and Beyond Longitudinal Study (B&B:08/18) Data File Documentation (NCES 2021-141). U.S. Department of Education. Washington, DC: National Center for Education Statistics, Institute of Education Sciences. Retrieved 8/24/2022 from https://nces.ed.gov/pubsearch.
Farrell, Diana, Fiona Greig, and Daniel M. Sullivan. 2020. “Student Loan Debt: Who is Paying it Down?” JPMorgan Chase Institute. http://www.jpmorganchase.com/corporate/institute/household-debt-student-loan-debt.
Greig, Fiona and Daniel M. Sullivan. 2021. “Who benefits from student debt cancellation?” JPMorgan Chase Institute. https://www.jpmorganchase.com/institute/research/household-debt/who-benefits-from-student-debt-cancellation.
We thank our research team, specifically Bernard Ho, for his hard work and contribution to this research. Additionally, we thank Elizabeth Ellis, Kristine Pham, Annabel Jouard, Stephen Harrington, Kate Finnerty and Clarke Wilson for their support. We are indebted to our internal partners and colleagues, who support delivery of our agenda in a myriad of ways, and acknowledge their contributions to each and all releases.
We are also grateful for the invaluable constructive feedback we received from external experts and partners. We are deeply grateful for their generosity of time, insight, and support. This research was possible because of the vital partnership, data, and knowledge from Experian.
We would like to acknowledge Jamie Dimon, CEO of JPMorgan Chase & Co., for his vision and leadership in establishing the Institute and enabling the ongoing research agenda. We remain deeply grateful to Peter Scher, Vice Chairman, Demetrios Marantis, Head of Corporate Responsibility, Heather Higginbottom, Head of Research & Policy, and others across the firm for the resources and support to pioneer a new approach to contribute to global economic analysis and insight.
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