Student loan forgiveness could wipe out $26B in debt in New Jersey and Pennsylvania

President Joe Biden’s new initiatives to ease federal student debt burdens nationwide would help hundreds of thousands of borrowers in Pennsylvania and New Jersey.

The plan, announced Wednesday, includes loan forgiveness of up to $10,000 for Americans who make less than $125,000 a year. Low-income borrowers who received Pell Grants could see federal debts up to $20,000 forgiven.

Biden has touted his policy as making good on a 2020 campaign promise, but the policy has drawn criticism from some on the right who say it’s irresponsible, especially during an inflationary period, and from some on the left who see the debt cancellation as not going far enough.

The $10,000 forgiveness plan could wipe out federal debt for under a third of federal loan borrowers in Pennsylvania and New Jersey if they fall under the $125,000 income limit. That represents overall debt cancellation of $26 billion.

Here’s what we know about federal student debt in Pennsylvania and New Jersey:

Nationally, 43 million people owe more than $1.6 trillion in federal student debt. In Pennsylvania and New Jersey, more than three million borrowers owe a combined total of more than $108.6 billion.

Pennsylvania ranks sixth nationwide for the total amount of federal student debt. New Jersey is 12th.

To put that $100 billion into context: The entirety of Pennsylvania’s state budget comes to less than half of that.

Nationally, borrowers owe an average of $37,700. Puerto Ricans have the lowest average federal student debt, followed by North Dakota, while Washington, D.C., tops the list in terms of the average amount of debt borrowers owe.

Both Pennsylvania and New Jersey residents have mean debts of about $36,000, with New Jerseyans owing slightly more.

Washington, D.C. and Georgia tops the list, with nearly one in five residents shouldering student debt. Pennsylvania and New Jersey are among the states with the highest share of borrowers relative to their adult populations.

The administration claims 90% of debt-forgiveness benefits will be reaped by households making under $75,000 a year. It’s hard to precisely assess the impact of Biden’s $10,000 and $20,000 forgiveness policies in Pennsylvania and New Jersey specifically, because federal student loan data do not include income information or break out Pell Grant recipients.

But here’s what we do know:

Not all borrowers make under $125,000, which could blunt the impact of the president’s policy. On the other hand, recipients of Pell Grants, which are aimed at low-income students, are eligible for up to $20,000 in federal student debt cancellation, which could increase the total debt cleared.

While some of the overall debt is held by a few borrowers who owe amounts above $100,000, more than half of borrowers in Pennsylvania and New Jersey owe less than $20,000. Under a quarter of borrowers owe between $20,000 and $40,000 and represent a significant share of the overall debt burden.

If every person in Pennsylvania and New Jersey who owes $10,000 or less qualifies for the loan forgiveness by making less than $125,000, more than 800,000 people would have their debt completely wiped out.