DENVER — President Joe Biden promised to wipe the college loan debt away from millions of Americans Wednesday in a major announcement from the White House.
The president announced that he will forgive up to $10,000 in student debt for borrowers earning under $125,000 per year annually or under $250,000 as a family. Pell Grant recipients, meanwhile, will be able to have up to $20,000 in debt relief.
While millions of people celebrated the news and some have already started to try to log onto the website to fill out an application for loan relief, millions of others expressed anger over the fact that this will not help their financial situation. Others worried about what this will mean for the economy.
Welcome relief
For some like Colorado state Sen. Rachel Zenzinger, D-Jefferson County, this was the right announcement at the right time from the federal government.
“I was really thrilled to hear the news that President Biden is taking this kind of action to forgive student loan debt. It's going to make a big difference,” she said.
Zenzinger says student debt has a multiplier effect because it prevents people from being able to save money or buy a house or invest in other aspects of their lives.
She is a teacher who is still paying off her own student loan debt in her 40s and says this has the potential of eliminating the balance she owes.
Because she’s a teacher, Zenzinger says she hasn’t been able to pay off her loans as aggressively as people in other professions, so the repayment process has been long and tedious. This month, she also just dropped her daughter off at college, so these savings will help her better support her daughter’s educational goals.
“It would be nice to be able to support my child in their college experience, which is very difficult to do while I'm still paying on my own student loan,” she said.
As a politician, though, she believes there’s more work to be done on a state and federal level to bring down the skyrocketing cost of school and make it easier for people to further their education goals without having to pay back loans for years or even decades.
“What are we going to do to tackle the high cost of higher education going forward because we can't always rely on this kind of amazing announcement to come along so we are going to have to think about things longer term,” Zenzinger said.
Short-term, short-sighted
Others like Rep. Colin Larson, R-Jefferson County, see the announcement as a short-term solution that will only help a handful of Americans out without tackling the true issue of student debt.
“I think it's a really short-sighted, frankly, political year stunt to address a very real problem that deserves, you know, a more thought-out solution with real bipartisan consensus,” Larson said.
Larson graduated from college in 2009 after receiving several academic scholarships and spent years paying off his student loans. He was eventually able to get all of his loans paid off so this announcement will not apply to him or to millions of others.
He worries that this announcement will only affect a sliver of people while leaving behind millions of others including current students who might not see any debt relief.
“It does nothing to solve the long-term problem of increasing higher education costs, debt burdens on future generations, including kids in college today, and it does nothing to help, frankly, people like me who paid their student loans off a few years ago,” he said.
Larson believes the burden to truly tackle the challenge of skyrocketing education costs will ultimately fall on Congress to address in the coming years.
Fears over the economy
Some like Sen. Paul Lundeen, R-Monument, also worry about what this announcement and the cancellation of hundreds of billions in loans will mean for the economy and for inflation.
“The reality is we're dealing with horrifying, terrifying inflation in America today. I mean, that everything all costs, all prices are running away from people,” Lundeen said. “As kind-hearted as it seems, this is going to feed into that inflationary spiral.”
Approximately 43 million Americans have federal student loan debt, which totals $1.6 trillion.
“As you graduate from college, it provides you a piece of paper that tells the world I can persist, I can do the work, I can get things done. Well, part of that is financing that education, and then paying off,” Lundeen said.
According to the Penn Wharton Budget Model, this type of loan forgiveness will mean $300 billion less for the federal government.
It won’t add to the national debt because that is money the U.S. owes and student debt is not part of that, according to University of Denver finance professor Mac Clouse. However, Clouse says forgiving the debt will reduce the dollars received by the US government from those borrowers which will increase the US budget deficit and could lead to increased government borrowing.
Clouse believes the forgiveness will more likely lead to people no longer having to make loan payments and instead using it to pay the higher prices that consumers face for food, gas and oil, services, etc.
Still, Lundeen worries about what this will mean for the power of the dollar and how it will affect future generations of taxpayers.
“The dollars in your paycheck are going to be worth less next month than they were this month. And they will be worth even less two months from now,” he said.
U.S. Congressman Ed Perlmutter, however, disagrees with that assessment and says he believes the move will actually help the economy in the long run.
“I was a bankruptcy lawyer for a long time before I got elected to Congress, and there is some loss to the nation, but I think it's made up for and then some by the investment that people will make,” Perlmutter said. “This will benefit the national treasury because more is going to get paid and people are going to invest in themselves in their communities.”
An estimated 700,000 Coloradoans will benefit from Wednesday’s announcement if they apply for the loan forgiveness.
Perlmutter believes the debt relief will give more young people the independence they need to make financial decisions to better their future rather than concentrate on paying off previous education choices.
“So many young people have felt saddled with their student loans that it has been hard for them to buy a home, hard for them to invest in a business. So this, I think, is a good step,” he said.
He would like to see Congress go even further and eliminate interest rates on student borrowers so that people are only required to pay back their principal on their loans. However, he doesn’t believe that type of a major move will happen before he retires this year.
For now, millions are celebrating the President’s announcement while millions of others are criticizing it.
