After a long period of deliberation with advisers and other representatives, President Biden made his decision on whether to forgive student loan debt. There was speculation on what would happen, but in the end, he elected to forgive the debt in what has been one of the biggest moves in his presidency so far.
The government will cancel $10,000 in student loan debt for borrowers making under $125,000, or couples making less than $250,000. This covers the scope of people in student loan debt as almost all of the 40 million Americans in student debt are eligible for this. Controversy surrounds this on every corner, and like every political decision it has mixed reviews.
For borrowers, this looks amazing because being a recipient of a Pell Grant from the government while qualifying for the conditions above gets the government to cancel $20,000 worth of student loan debt. 6 out 10 borrowers who apply for student loans received Pell Grants along with it, and the White House estimates that 20 million people can be free of student loan debt under these circumstances. However, some previous borrowers who paid their loans off aren’t too happy as money will be coming out of their pocket. There must be some way to fund this, so the plan will cost $300 billion over the next 10 years.
The political side has been very partisan, like always, with Republicans bashing the decision and calling it unconstitutional while Democrats praised the decision. Economists affiliated with White House officials dislike it though, saying it will lead to spending cuts and tax increases in the future. People are also curious as to how it would affect the current inflation problem, but the White House has reassured that inflation wouldn’t change or it would decrease in the future as family budgets won’t be tight anymore. Some people are calling it a political gimmick in the wake of the midterms, but either way this will have a major impact on the future of the economy.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.