Gen Z Left Out of Biden's Student Debt Relief

Gen Z has been largely left out of Joe Biden's student loan forgiveness options this year, and many are struggling to pay off their monthly payments as they navigate low starting salaries and economic uncertainty.

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Gen Z—born from 1997-2012—graduated during an uncertain job market, with many entering the workforce right when the pandemic upended companies and shifted to a remote work culture. At the same time, the generation has faced some of the highest educational costs, with the average college tuition and fees at a four-year school costing $19,806 per year during the 2021-2022 school year.

According to the Federal Reserve Bank of St. Louis, Gen Z has an average of $20,900 in student debt, which is 13 percent higher than millennials. That translates to a median loan of $12,800, which again is around 14 percent higher than that of millennials.

Despite these factors, the Department of Education has not included Gen Z in most of the student loan relief options available to federal borrowers.

Biden's current relief initiatives target those who took out loans more than 20 or 25 years ago or those who have worked in public service for 10 or more years.

Altogether, Biden has canceled almost $160 billion for 4.6 million borrowers, but the majority of that relief comes after years of making loan payments, making Gen Z ineligible since they only recently graduated college or are still attending.

Michael Lux, an attorney and the founder of the Student Loan Sherpa, said the majority of student debt relief has gone to older borrowers, but it was for a specific reason.

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"I'd also say that it is intentional. For many years, borrowers received lousy advice from loan servicers and the Biden fixes have attempted to fix these issues," Lux told Newsweek.

Other times, loan relief went out to borrowers who attended misleading for-profit schools. Most recently, Biden passed $6.1 billion in student debt cancellation for the 317,000 borrowers who attended The Art Institutes.

This relief came as the organization "falsified data, knowingly misled students, and cheated borrowers into taking on mountains of debt without leading to promising career prospects at the end of their studies," Biden said.

The institution closed its campuses last year after facing fraud accusations, and now everyone who attended The Art Institutes between January 1, 2004, and October 16, 2017, is eligible for forgiveness.

Not all of Biden's attempts to cancel student debt have been fruitful, though. His administration initially passed $430 billion in student debt forgiveness, but the Supreme Court struck down the policy last year.

Under that policy, Biden would have seen more than 40 million Americans benefit, including many Gen Z-ers. The program hoped to offer $10,000 in relief to all borrowers earning less than $125,000. All borrowers who were Pell Grant recipients and came from a low-income background qualified for $20,000 in relief.

Still, Gen Z is bound to benefit from Biden's loan forgiveness—it just might not be as immediate.

The new SAVE plan the Education Department has offered will see many Gen Z-ers get lower student loan bills monthly, if not full forgiveness down the line.

Under SAVE, borrowers will have their monthly payments calculated based on their income and family size, with many remaining balances forgiven after several years. Via the new repayment plan, monthly payments range from 5 to 10 percent of a borrower's discretionary income.

But none of the relief available negates the overarching problem that has led to the student loan forgiveness policies, Lux said.

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"Ultimately, the root problem with student loans is that college is too expensive," Lux said. "The forgiveness programs help people impacted by this issue, but it does nothing to lower the cost of college."

As Gen Z waits it out, many might feel tempted to forego their loan payments until another large-scale debt relief plan comes their way, but this would be a mistake, according to Alex Beene, a financial literacy instructor at the University of Tennessee at Martin.

"It looks like Gen Z student loan holders will mostly have to wait to take advantage of forgiveness programs until 10 years or more after the start of their payments, but they should wait with caution and still make their monthly payments," Beene told Newsweek. "There's no guarantee there will be forgiveness plans down the line, and avoiding your student loan payments will have long-term financial repercussions on their credit score."