How Student loan relief could effect your credit and borrowing capacity.

By The Exchange Team

Student debt makes it difficult to establish a business or buy a home because lenders consider your financial obligations.

President Biden's plan to cancel up to $20K in student loans will help many people's balance sheets and credit scores.

Biden said most federal student loan holders will be eligible for forgiveness of up to $10,000 if they didn't get a Pell Grant and $20,000 if they did.

Student loan forgiveness may have a little impact on your credit score, says CreditCards.com's Ted Rossman. He says it won't be big.

Student loans are "instalment loans,",  These don't greatly affect your credit usage rate, he said. 30% of your score is based on your utilization rate.

Still, Any score rise may help you acquire better loan terms. Also, Less Student loan debt improves your "debt-to-income ratio,".

When determining how much money to lend you, lenders take this ratio into consideration. Some use something called the 28/36 rule