On August 24, the Biden administration released a plan to forgive student loan debt for millions of university graduates across the country, this includes thousands of former Texas State students.
As stated in the current plan, borrowers without Pell Grants may be relieved up to $10,000 and those who have Pell Grants are eligible for an additional $10,000 in relief, totaling $20,000 of loans forgiven.
Bill Chittenden, associate dean for graduate programs and an associate professor of finance at the McCoy College of Business Administration, explains to who this current plan applies.
“Borrowers had to have already borrowed the student debt by June [2022]. So if you just got a student loan for this semester, that’s not going to qualify under this plan,” Chittenden said. “The eligibility requirement for single taxpayers is if they have an annual income of up to $125,000 or $250,000 for married couples, meaning most folks are going to qualify under this.”
According to The White House, approximately 43 to 45 million Americans have federal student loans outstanding and approximately 15 million of them owe $10,000 or less.
“About [20] million people will have their student debt completely wiped out. Another 20% have somewhere between 10 and 20,000 [dollars]. Now again, not all of them are going to meet the Pell Grant requirement, but out of them the idea is that I believe it was another 5 million or so,” Chittenden said.
The current cost to wipe out this debt is about $500 billion, which is approximately one-third of all the student debt that is outstanding.
While this number may seem larger, Chittenden explains that the current total outstanding student loan debt is $1.7 trillion.
“That [amount] exceeds even all the auto loan debt that’s out there,” Chittenden said. “The only things that it’s behind are mortgages and credit card debt.”
It is unknown if this will be one-time debt forgiveness or if it will reoccur. President of Texas State’s chapter of the NAACP Princely Kamanda said this would help with the equity gap, which is a significant disparity in educational achievement between groups of students.
“Texas State is a minority serving university and minorities tend to have more student debt than any other demographic. I think this would impact them positively, especially the Black community,” Kamada said. “The average Black student has more than $50,000 in student loans. Taking out $10,000 would give them more disposable income and be good for the economy as well.”
Alyssa Munoz, an exercise and sports science senior, also believes this may help the economy by elevating financial stresses later in life.
“I honestly think it can probably help people who are in the lower class just because I know that student debt holds a lot of people back in like later life from like progressing or even being able to buy a home and buy cars,” Munoz said.
However, this raises some concerns for Chittenden who believes this isn’t going to boost the economy, but rather have a negative effect.
“I don’t think there’s going to be a big boost to the economy because of this loan forgiveness and that’s because for the last two and a half years, students that had to make student loans have not had to make them,” Chittenden said. “The vast majority of the 45 million folks that have student loans outstanding, don’t have to make their loan payments, nobody that’s got federal student loans has had to make those payments.”
As of now, the Department of Education has yet to release the application for student debt loan forgiveness.
For more information on the student loan debt forgiveness plan, visit https://www.whitehouse.gov/briefing-room/statements-releases/2022/08/24/fact-sheet-president-biden-announces-student-loan-relief-for-borrowers-who-need-it-most/.