Which Student Loans Will Biden Forgive? What It Will Cost and How It Will Affect the Economy

Student loan forgiveness has been a major political topic. Supporters of a comprehensive cancellation of student loans were dismayed to see no mention of this topic in the Democratic $2 trillion budget bill. How about forgiving student loans, Vice President Biden? What would the financial implications of his forgiving student loans be?

The amount of money Americans owe for their education has skyrocketed in the previous two decades. The Federal Reserve calculated that overall student debt in the U.S. was $1.73 trillion in the second quarter of 2021, which is nearly 8.2 percent of the country’s 2020 GDP.

The sum total of student loans in the United States now exceeds the combined total of all credit card and vehicle loan balances. Student loan debt has risen by 91% in the past decade. The growth rate surpasses that of the U.S. GDP and as a result student loans as a percentage of GDP have soared. According to Education Data Initiative, the average federal student loan debt is $36,510, but the private student debt average is considerably higher at $54,921.

The average student debt balance varies by state. Some states, like New Hampshire and Delaware, have a higher than average student debt load, while others, like Utah and New Mexico, have lower than average student loan balances.

President Joe Biden has made it clear that addressing the student loan crisis is a priority for his administration. During his campaign, he proposed several measures to make higher education more affordable and to help borrowers who are struggling to repay their loans.

One of the most notable proposals is to provide a one-time cancellation of up to $10,000 of federal student loan debt for borrowers. This would provide immediate relief to millions of Americans struggling to repay their student loans. The proposal would also help to address racial and economic disparities in the student loan system, as Black and low-income borrowers are disproportionately impacted by student loan debt.

In addition to the one-time cancellation proposal, President Biden has proposed several other measures to make higher education more affordable. These include:

• Increasing funding for need-based financial aid programs, such as Pell Grants, to help low-income students afford college.
• They are making community college free for all students, regardless of income.
• We are increasing funding for historically Black colleges and universities (HBCUs) and other minority-serving institutions (MSIs).
• We are creating a new program to provide free tuition at public four-year colleges and universities for students from families with incomes below $125,000 per year.
• I am simplifying the Free Application for Federal Student Aid (FAFSA) process to make it easier for students and families to apply for financial aid.
• Expanding access to income-driven repayment plans allows borrowers to repay their loans based on their income and family size.
• They are allowing borrowers to refinance their student loans at lower interest rates.
• It creates a public credit bureau to track and report student loan payments, similar to the credit reporting agencies that track credit card and mortgage payments.

President Biden’s proposals would make a significant difference for the millions of Americans struggling with student loan debt. The one-time cancellation proposal alone could relieve up to 42 million borrowers. Other measures would make it easier for students and families to afford college and repay their loans.

However, it’s important to note that President Biden’s proposals will require the approval of Congress. While Democrats control the White House and both chambers of Congress, passing legislation related to student loan forgiveness is not guaranteed, as many factors could influence the outcome.

Additionally, even if these proposals were to be passed, it would take time to implement these programs and provide relief to borrowers. Therefore, it’s important to continue monitoring these proposals’ progress and to stay informed about the various options available to help with student loan repayment.

Student loan defaults

A significant proportion of those who have taken out a student loan — over 25% — are already delinquent or in default. Under the CARES Act, there was a pause in the collection of student loan payments during this time. In February of 2022, the suspension of payments will cease.

Biden on student loan waivers

Biden had proposed in his election campaign that everyone’s student loans be forgiven if they owed less than $10,000. While this would help alleviate some of the issues, some liberal Democrats are pushing for him to increase the cap to $50,000.

Approximately $9.5 billion in student loans have already been forgiven by Biden. In many cases, however, the borrowers were either physically unable to work because of a preexisting condition or were victims of academic fraud. The government has also made changes to the PSLF (Public Service Loan Forgiveness) to make it more user-friendly.

Senator Elizabeth Warren on student loans

One of the loudest advocates for cancelling student debt is Senator Elizabeth Warren. She has urged Biden to use his power as vice president to forgive student debt. Similarly, Warren has urged Biden to take executive action to legalise marijuana.

Others on the left of the Democratic Party, including Representatives Nikema Williams, Pramila Jayapal, and Ilhan Omar, have made similar requests of Vice President Joe Biden to forgive federal student debt.

How would the debt waiver help the U.S. economy?

If student loan debts were forgiven, borrowers may use that money toward other investments, which would benefit the economy. Forgiveness of student debt is an issue of racial equality in Warren’s eyes. The default rate for student loans held by black borrowers is significantly greater than that held by white borrowers.

In conclusion, President Joe Biden has clarified that he wants to address the student loan crisis and make higher education more affordable for all. His proposals, such as one-time student loan forgiveness of up to $10,000 and increasing funding for need-based financial aid programs, would provide immediate relief to millions of borrowers struggling to repay their loans. However, these proposals will require the approval of Congress, and even if passed, it will take time to implement them. Therefore, it’s important to stay informed about these proposals’ progress and explore all options available to help with student loan repayment.