Who benefits from the 2022 student debt cancellation?

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:

1. 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.
2. 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.

3. 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.
4. 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.

5. 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.
6. 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.