In August 2022, the Biden administration announced a plan to forgive up to $10,000 in federal student loans for almost all borrowers, with up to an extra $10,000 for borrowers who had received Pell grants. The additional forgiveness for Pell borrowers intends to address the racial wealth gap, as Black and Hispanic students are more likely to receive Pell grants than white students.
This report from the Urban Institute analyzes a sample of a recent cohort of borrowers to show that although the “Pell bonus” has little impact on the racial distribution of recent students who will receive student loan relief, it significantly increases the share of Pell recipients, of all racial and ethnic groups, who will have all their federal loans forgiven.
Additional findings include:
- Pell recipients are less likely than their non-Pell peers to have earned a bachelor’s degree and are nearly twice as likely to have left school with no credential.
- Among all non–Pell students eligible for $10,000 in debt forgiveness, white borrowers make up the largest share of forgiveness recipients.
- Because Pell recipients are more likely to be Black or Hispanic, targeting Pell recipients likely benefits students of color and students who left school with no degree or credential.
- The addition of the $10,000 Pell bonus increased the share of recent Pell recipients who would have the full amount of their federal student loans forgiven from 37 percent to more than 50 percent.