On Wednesday August 24, President Biden announced a student loan forgiveness plan that would see $10,000 of debt eliminated from most borrowers. This is obviously of interest to me because I am one of the millions of Americans with student loan debt.
According to the White House, “The Department of Education will provide up to $20,000 in debt cancellation to Pell Grant recipients with loans held by the Department of Education, and up to $10,000 in debt cancellation to non-Pell Grant recipients.” The Department of Education will provide $20,000 to those whose income is less than $125,000 per year, and married couples whose income is less than $250,000.
An obvious positive to this plan is that Americans won’t have to worry about paying off thousands of dollars in debt, and they can put the money they’ll save toward other needs, such as housing or transportation. According to Brittanica, “Student loan debt prevented about 400,000 people from buying homes between 2005 and 2014, which accounted for 25% of the decrease in home-ownership.” To be honest, I’ve never even thought about buying a house because I couldn’t never see a way where I’d be able to save up enough, even if I were to have a well-paying job.
This plan brings up a few issues, however. Even if people with current student loan debt use this plan to their advantage, what’s going to stop the debt from accumulating? According to the Federal Reserve, there is currently over $1.75 trillion owed in student loans spread across 48 million Americans. The cost of education is going to continue to rise, so even if we forgive people’s debt now, the next generation of college students is going to be in debt as well. According to CNBC, the cutoff date for student loan debt relief is June 30, 2022. This means that loans taken out after that date won’t be eligible for relief. The cycle of debt won’t end unless the cost of education is somehow lowered.
To go along with my previous point, if student debt keeps being forgiven in the future, this will cause colleges to increase tuition due to the larger amount of loans being taken out. People will be willing to take out more loans, thinking that it will be forgiven. Abigail Hail Blanco, Assistant Professor of Economics at the University of Tampa, said, “If schools knew the government would forgive the cost of their students’ education, they’d face no incentive to cut costs to keep tuition down.”
I think that student loan forgiveness is a good short term solution to a larger problem. While I’m happy to see so many people being relieved of the stress of student debt, what about future students? Theoretically, they are going to be facing higher tuition prices anyways, and student debt forgiveness is going to allow colleges to keep raising their prices. The cost of education is the real issue, in my opinion. The reason students need to take out these loans is because it’s just not realistic for the average person to put themselves through college on one job alone anymore.
