Effects of Cancelling Student Loan Debt (2026) : Short & Long-Term

Report Highlights. Economic models indicate cancelling student loan debt would support economic growth, such as increasing the U.S. gross domestic product (GDP) by $216.23 billion (in 2025 dollars) in the first year.

In one economic model, cancelling student loan debt by up to $10,000 per borrower student loan borrower added $1.083 trillion to the U.S. GDP over 10 years.
The initial cost to cancel up to $10,000 per student loan borrower totals $355.2 billion for a potential return on investment (ROI) of 205%.
1-in-3 federal student loan borrowers (14.6 million) have an outstanding balance of $10,000 or less.
Cancelling student loan debt may reduce unemployment by adding up to 1.5 million new jobs as a direct result of financial stimulus.
The average federal student loan borrower owes $39,633; among loans in repayment, the average balance is $35,090.

Bar graph: Cost of Student Loan Debt Cancellation by Forgiveness Limit according to the Office of Federal Student Aid

Who Would Benefit From Student Loan Debt Cancellation?

While research and statistics indicate there may be social benefits to canceling student loan debt, there is disagreement about the equity of student debt forgiveness and the debt burden among minority groups.

63% of borrowers report struggling at least once to make their student loan payment(s).
37% of student loan borrowers have missed at least one payment.
Federal student loans represent 92.1% of all student loan debt, public and privately held ($1.838 trillion total).
A total of 42.8 million student borrowers have outstanding federal loan debt.
Women owe 60.3% of federal student loan debt.
Among bachelor’s degree holders, women earned 70.0% of what their male counterparts earned in 2024 (down from 72.3% in 2023).
Black student borrowers owe a median 95% of their debt 20 years after starting college; among white student borrowers, the median amount owed after 20 years is 6%.
20.1 million student loan borrowers (45.7%) are under 35 years old; 9.5 million student loan borrowers (21.0%) are 50 and older.
Borrowers under 35 years old owe 33.0% of student loan debt ($561.0 billion); borrowers aged 50 years and older owe 26.6% of student loan debt ($472.3 billion).

Line graph: Effects of Cancelling Student Loan Debt</a> “Student Debt Cancellation Return on Investment according to the Office of Federal Student Aid”></p>
<h3 id= Who Currently Benefits from Federal Loan Discharge Programs?

Federal student loan cancellation, forgiveness, or discharge is always available on a case-by-case basis.

10% federal student borrowers have had a loan discharged, cancelled, or forgiven, in whole or in part.
Student loan borrowers who have benefited from debt relief had a median household income between $50,000 and $65,000 in 2022 (the U.S. median was $75,000).
22% of all federal student loan borrowers have applied for some type of debt relief.
15% of federal borrowers have applied for Public Service Loan Forgiveness (PSLF), making it the most commonly applied-for student debt relief program.

Pie chart: Degree Attainment Among Existing Student Loan Discharge Beneficiaries according to the Consumer Financial Protection Bureau

How Do Borrowers Already Benefit from Student Loan Debt Relief?

Federal student loans include borrower protections such as income-based repayment plans.

61.5% of student borrowers who received debt relief reported that relief allowed them to make beneficial life changes.
45.1% of student borrowers who received debt relief report building more personal savings.
18.8% of existing student debt relief beneficiaries sought medical care they had put off due to education debt.

Horizontal bar graph: Student Loan Discharge Recipients Reporting Subsequent Life Benefits according to the Consumer Financial Protection Bureau

What Student Loans Would Be Cancelled?

Federal legislators have proposed student loan debt relief for lower-income borrowers, and proponents are in favor cancelling between $10,000 and $50,000.

32.2% of federal student loan borrowers owe $10,000 or less.
73.5% of federal student loan borrowers owe less than $40,000.
Up to 5.7 million student borrowers have outstanding debt for multiple federal loans.
26.9 million borrowers owe between $10,000 and $100,000 in federal student loans; the average balance among them is $34,078.
33.3 million federal student loan borrowers (77.8%) have an outstanding balance below $40,000; among them, the average balance per borrower is $14,348.
Under the $10,000 forgiveness plan, over 90% of borrowers with associate degrees would qualify.

Bar graph: Newly Debt-Free Student Borrowers by Forgiveness Limit according to the Office of Federal Student Aid

How Much Will It Cost to Cancel Student Loan Debt?

Administrative costs may be negated by the amount of interest paid by indebted student borrowers; most student loans net some amount of interest.

Cancelling up to $10,000 per student loan borrower would reduce the total debt by $355.2 billion.
Up to $40,000 in student debt relief per borrower would cost $857.8 billion.
Cancelling up to $60,000 per student loan borrower would cost $1.003 trillion.
$52,928 is the average debt balance among the 30.7 million federal student loan borrowers with outstanding debt above $10,000.

Line graph: Student Debt Cancellation Effect on Annual Job Creation according to the Levy Economics Institute of Bard College

Will Cancelling Student Debt Benefit the Economy?

Arguments for student loan debt cancellation include economic stimulus and business growth while arguments against claim cancellation would lead to inflation and higher interest rates.

Each time a consumer’s student debt-to-income ratio increases 1%, their consumption declines by as much as 3.7%.
44% of student borrowers report delayed homeownership due to their education loan debt.
Would-be entrepreneurs are 11% less likely to start a new business if they owe more than $30,000 in student loan debt.
In order to fight higher inflation rates, some experts predict that the federal reserve would need to raise interest rates by 50 to 75 basis points.

Bar graph: Share of Student Loan Debt Cancelled by Forgiveness Limit according to the Office of Federal Student Aid

Would Cancelling Student Debt Yield a Return on Investment?

Proponents of debt relief argue there will be a long-term return on investment.

Projections indicate cancelling student debt up to $10,000 per borrower would deliver an ROI between 145% and 205% after 10 years.
In the first year, the ROI for student debt relief of up to $10,000 per borrower would be between -75.5% and -69.3%.
One model estimates a negative ROI for partial loan forgiveness with each dollar spent on student loan forgiveness returning between 2 and 27 cents in economic activity.

Line graph: Student Debt Cancellation Effect on State Budget Gains according to the Levy Economics Institute of Bard College

Who Supports Student Loan Debt Cancellation?

The power to cancel student debt lies with the executive and legislative branches of the federal government.

Independent think tanks, such as the Roosevelt Institute (linked below under Sources), frequently publish reports of potential benefits of student loan debt cancellation, such as socioeconomic equity and reduced unemployment.
Student debt growth has launched numerous advocacy groups, such as the Debt Collective, the Project on Predatory Student Lending, and the Student Debt Crisis Center; many of these groups support some sort of mass federal debt cancellation.
Some groups, such as the Project on Predatory Lending, call for existing federal student debt to be cancelled entirely.
Over 100 organizations, led by the Center for Responsible Lending, signed a letter to Congress demanding student debt cancellation on the grounds that it would “boost economic growth and create jobs.”
The Senate Committee on Health, Education, Labor, and Pensions passed a resolution in 2021 requesting the President “take executive action to broadly cancel federal student loan debt.”
U.S. legislators passed the American Rescue Plan in March 2021, which includes a provision that student loan forgiveness issued between December 30, 2020 and January 1, 2026 will not be taxable to the recipient.