President Biden announced late last week his administration’s first steps to start to address the student debt crisis.
Fulfilling his campaign promise, Biden announced in his speech he is erasing $10,000 in federal student loan debt for everyone in the United States making less than $125,000 a year and a further $10,000 for those who received federal Pell Grants.
He also announced a final payment freeze extension on current federal student loan repayments until Dec. 31 of this year. Anyone who made any payments since the start of the payment pause on March 13, 2020 is also eligible to get that amount refunded according to the Department of Education’s website.
Biden’s announcement also comes with a new income-driven repayment plan for federal student loans. While the exact details have not yet been announced, he promised to cap undergrad student loan payments at no more than 5% of a borrower’s discretionary monthly income, now down from 10%. This includes absolving federal student loans if paid for more than 20 years.
The Public Service Loan Forgiveness program is also getting reworked. Those in public service jobs — such as teachers, police officers and more — who pay their loan(s) down for 10 or more years will be eligible to have their federal loan(s) totally forgiven. Biden’s “PSLF program” is retroactive, meaning it includes those in public service who have already paid off their loans for 10 or more years according to the Associated Press.
UConn spokesperson Stephanie Reitz said the school hopes Biden’s plan will help UConn students afford the cost of attendance on top of the aid UConn already awards students.
“One of UConn’s primary goals as a public university is to be accessible to talented students — regardless of their income levels — by providing strong financial aid offers for those who qualify,” Reitz said. “While we know that many students and families use student loans to help meet their college costs, UConn wants to help reduce their reliance on loans as much as it can by providing them with grants, scholarships and other gift aid that doesn’t need to be repaid. We also know that about 30% of our incoming first-year class has personal or family incomes that qualify them for federal Pell Grant aid.”
Reitz further explained via email that “UConn can’t quantify how many of its graduates and current students might be benefiting from the new federal program because the debt forgiveness depends on the income levels of each individual,” data which the University isn’t privy to.
According to the Biden Administration, 95% of borrowers — or 43 million people — will benefit from this debt cancellation. Over 60% of those 43 million people are Pell Grant recipients, meaning 27 million people will get $20,000 in debt forgiveness. 20 million people, or nearly 45% of all borrowers, will have all their student debt forgiven.
This student debt forgiveness includes current UConn students as well, as long as their loans were issued prior to July 1, 2022.
Undergrad Student Government President Mason Holland thinks Biden’s Student Loan Forgiveness plan is a step in the right direction.
“I think what it is, is a great first step… I don’t think it’s the only thing the Biden Administration should enact in relation to student loan cancellation,” Holland said. “I also don’t think it should be the last time that we hear something about what either the president or Biden specifically says about the student loan crisis, because it is one of the main things that students in our university struggle with … So, while it is something that’s substantive… and it’s going to impact a lot of people’s lives, it’s not the end. It’s the means to an end. It’s definitely a great direction, but it’s not where we end up, a lot more needs to be done.”
While many at UConn will see Biden’s student debt forgiveness program as positive, others will not. A UConn student who wished to remain anonymous said they are worried debt cancellation may cause other problems, such as furthering inflation without actually addressing the problem of student debt.
“Personally, the debt relief decision frustrates me very much because it does not address the root cause of why attending university is so expensive,” the student said. “Many public universities used to be very affordable for in-state students, in some cases even free.”
The anonymous UConn student further emphasized their frustration with the plan.
“My frustration with Biden’s decision stems from this: It is fiscally irresponsible in a time of rampant inflation, does not solve the root cause of the problem, and is really only a carrot to ‘buy’ votes using the public’s money… Make no mistake, every single one of us will pay the price for Biden’s decision… Bribing the public with their own money, and spinning it as it is being done ‘for the people,’ while the country is coming dangerously close to monetary crisis, is criminal beyond words,” the student said.
The White House has not released any concrete number on the cost of the student loan forgiveness plan, but White House Press Secretary Karine Jean-Pierre told CNN that they estimated the program would cost $24 billion per year. Biden had also said in his speech that the program should pay for itself.
“Independent experts agree that these actions, taken together, will provide real benefits for families without meaningful effect on inflation… There is plenty of deficit reduction to pay for the programs — cumulative deficit reduction — to pay for the programs many times over,” Biden said in his remarks to the nation.
Economists are mixed on the economic impact, however. For example, the Committee for a Responsible Federal Budget estimates the cost of the plan will be about $500 billion over the next 10 years, while the Penn Wharton Budget Model estimates the 10-year cost of Biden’s plan at $605 billion on the “conservative side,” perhaps as high as over $1 trillion.
Until the fine details are actually announced regarding the Public Service Forgiveness Plan and the income-driven repayment plan, an exact estimation on the cost of Biden’s student loan forgiveness programs and its effect on inflation cannot be said for sure.