To combat rapidly rising student debt accumulation, the Biden administration has announced its student loan forgiveness plan.
The administration is forgiving up to $10,000 in student loan debt for all borrowers who make less than $125,000 annually. The White House will also forgive up to $20,000 for individuals who qualified for federal Pell grants, including low-income, first-time college students.
With about one-third of undergraduate students receiving Pell grants, exactly how much of an impact will Biden’s decision have?
“I think that the plan is really bad for our economy, and that we’re already in such a poor economic state after trying to recover from COVID,” said Isabelle Graham, a freshman business major at UNLV. “It’s just not realistic to have this bill come out right now.”
Graham talked about how the government providing debt relief could be equated to the government giving handouts to American citizens.
“People will become more reliant on the government,” Graham said. “They’ll see it as a backup, like ‘The government’s going to help me if I don’t make it through school.’”
Over 14 million borrowers have $10,000 or less in federal student loan debt in 2022, according to the Department of Education. Those borrowers would be eligible to have their debt completely forgiven, if they fall below the income cap. That does not make up even half of the 43 million Americans who racked up a total of $1.6 trillion in federal student loan debt, according to the Department of Education.
By having an income cap on qualification for relief, Biden’s loan forgiveness plan only helps a select population. It excludes those who may have developed a large amount of debt but have a substantial income and those who chose to not attend college due to lack of finances.
Weighing the overall cost of Biden’s relief measure against the outcome is pertinent, particularly acknowledging the possible impact on inflation after it reached a 40-year high earlier this year, according to multiple sources.
According to the Committee for a Responsible Budget, the plan costs half-a-trillion dollars. The U.S. currently can’t afford this plan worsening inflation and the labor shortage.
On top of the financial aspect, there is a cultural aspect to consider with this issue. Students can become more inclined to drop out of school, as they won’t have as heavy of a financial burden if they drop out.
This is yet another change the U.S. can’t afford, as less than 3 in 5 students complete a “four year” degree within six years, according to Rachel Greszler, a member of the Heritage Foundation, in a commentary article for The Daily Signal.
Rather than putting the nation further into debt, the Biden administration would serve well to encourage more affordable education options.
By enforcing their plan, the Biden Administration would show complete disregard to families who saved up for college, Americans who enrolled in the armed forces to avoid collecting debt and graduates who gradually paid off all their debt.
Biden’s forgiveness plan is ultimately a plan so costly that it will end up taking from every American citizen through tax dollars—college graduate or not.