What you think of President Joe Biden’s plan to write off up to $ 10,000 in student debt probably depends on your situation. If you are a current student or a recent graduate (or the parent of one), you might be grateful for any relief from your debt. If you’ve never been to college, or if you’ve never paid back the loans you took out back then, you might be more concerned about the impact of the trillions of dollars being written off. debt on the country’s economy. In this article, we’ll look at some of the possible positive and negative effects of student debt cancellation.

What is Biden’s plan to write off student debt?

There are limits to what Joe Biden can do on his own to solve the student debt problem. Some policies may be set by his Department of Education, while others will require congressional approval. Given that Democrats have (slim) majorities in both houses of Congress, it’s likely that some type of change will occur.

Ahead of the election, Biden shared some of his ideas for higher education reform on his campaign website. “Joe’s Diary for StudentsDescribed multiple initiatives related to the cost of college education, including increasing Pell Grants, halving federal undergraduate student loan payments, and expanding loan forgiveness programs.

On his first day in office, Biden signed an executive decision to maintain the moratorium on most federal student loan payments, as enacted under the Trump administration, until September 20, 2021 at least. The interest rate on these loans will also remain at 0%.

In the near future, Biden is expected to ask Congress to pass legislation providing for a $ 10,000 forgiveness of federal student loans. Other members of his party, however, argue that this is too small a target and have pleaded for a higher dollar amount. Independent Senator Bernie Sanders has proposed to write off all existing student debt.

Positive repercussions of canceling student debt

Although many borrowers owe more than $ 10,000, any form of student loan forgiveness would benefit them financially. Some economists believe that canceling loans would also serve as a stimulus to the economy as a whole, as borrowers could then use that money for other purposes, such as buying a home.

Cancellation of student debt could be of particular benefit to low-income borrowers, especially women and people of color. A recent academic article argued that the “median wealth of black households overall, not just borrowers, would instantly increase by 42% with $ 75,000 in student debt relief and about 34% with $ 50,000 in remission. “ These are higher amounts than Biden suggested, but would be in line with his administration’s initiatives to tackle racial fairness.

Negative repercussions of canceling student debt

Critics oppose the cancellation of any amount of student debt, in part because it would unduly benefit a relatively privileged class of people – college graduates. Although more than 40 million Americans have at least one student loan debt, they make up only about one-eighth of the American population. Some people who did not attend university or who have already had difficulty paying off their student loan debt may also object. Plus, forgiveness or forgiveness of student debt does nothing to deal with the high overall cost of college education today.

The Bottom Line

Although there is a general consensus that higher education reform, especially with regard to costs, is desirable, experts are divided on whether the cancellation of all or part of the student loans is the best way to go.