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President Biden campaigned on a promise to reduce student loan debt. Today, his administration is making good on that promise and giving families relief by taking the initial steps toward launching his loan forgiveness program, under which eligible borrowers will be granted a debt forgiveness package of up to $20,000. An analysis conducted by the United States Department of Education found that the typical undergraduate borrower graduates with over $25,000 worth of dept. Thus, many students will have their loans forgiven almost in full thanks to this initiative (The White House, 2022). But, as with any law, this one also has supporters and opponents. The paper will quantify both sides by looking at the pros and cons of the program. While Joe Biden’s plan to cancel student debts will free individuals from student debt and allow them to use all their resources to improve their lives, the program has fairness issues. For instance, it does not grant equal benefits to all, and others, like those with private loans, will simply not benefit from the program.
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There are several reasons why student loan forgiveness is a good idea. Let us start by looking at the benefits to individual students. First, it will help students escape the burden of student debt. If students have taken out loans to pay for school but cannot find a job in their field and make enough money to pay off those loans, they may feel trapped. The programs would give them the much-needed relief to focus on improving the quality of their lives and those of their families. It would also save them mental health issues like stress and depression, which are common when people are trapped in debt (Rohe et al., 2016). Another benefit to students is that it will give them an incentive to pursue careers that may be considered less lucrative but more fulfilling or meaningful, for example, teaching preschoolers or social work. Therefore, it would benefit individual students and communities needing such professionals.
For the economy, student loan forgiveness will allow young people to invest in their future without worrying about paying off their student loans. Besides, the program would offer an opportunity for graduates to transition into the middle class faster than they would with a pending student loan, which is good for the economy because the middle class is known for its consumption (Alonso et al., 2017). The more the consumption, the larger the gross domestic product (GDP) since more goods will be produced to meet the needs of the rapidly expanding middle class. Equally, the student loan forgiveness program would help the economy by keeping more people in school and working on their degrees. That is because many people who would otherwise drop out of school due to financial stress will stay enrolled since the loan forgiveness program would soften their financial obligations. Overall, it would mean more educated people will enter the workforce, which is good news for economic development.
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Students who obtain a Pell Grant are the real winners because they will receive the $20,000 maximum student loan forgiveness. Those who did not will only be eligible for $10,000 (Minsky, 2022). The disadvantage here is that people who need a significant portion of their loan forgiven but did not get the Pell Grant or did not apply for the grant for one reason or another will not be able to get that amount forgiven. For example, if a borrower has a $30,000 loan and did not receive a Pell Grant because they were making too much money to qualify for it or did not know about the program’s existence, they would only be eligible for $10,000 worth of student loan forgiveness. As a result, those affected by this may feel like they are not being treated fairly.
Finally, not all types of debt qualify for forgiveness. For example, private loans do not qualify (Minsky, 2022). Therefore, those who took out a private loan to pay for their education will have to keep paying it back. There are two reasons why this is the case. First, over $140 billion has been borrowed in private student loans, which account for little over 8% of the outstanding debt owed by students. Therefore, this percentage is tiny to be considered a priority by stakeholders. Second, the government cannot cancel private student loans since the debt is owed to individual lenders instead of the federal government, like other average student loans (Williams, 2022). Thus, students with private student loans will have to pay these loans themselves.
In conclusion, Joe Biden’s student loan forgiveness has several pros and cons. Student loan forgiveness is a great way to reduce the debt burden for those struggling to pay these loans and make it easier for them to manage their finances and lives well. However, while it can be an excellent way for many to get rid of their student loans, it is also essential to consider the disadvantages of the program before making a final decision. First, only students who had received Pell Grant qualify for the $20,000 maximum student loan forgiveness; others will only get the $10,000 maximum. Besides, students who have private student loans do not qualify for the program. Thus, they will continue struggling with their loans. What is clear is that some people will not benefit from the program, and others will benefit more than others. Consequently, this raises fairness issues that must be addressed.
- Alonso, L. E., Fernández Rodríguez, C. J., & Ibáñez Rojo, R. (2017). “I think the middle class is disappearing”: Crisis perceptions and consumption patterns in Spain. International Journal of Consumer Studies, 41(4), 389–396. https://doi.org/10.1111/ijcs.12352
- Minsky, A. S. (2022). When Can Borrowers Expect Student Loan Forgiveness under Biden’s New Plan? Forbes. https://www.forbes.com/sites/adamminsky/2022/09/13/when-can-borrowers-expect-student-loan-forgiveness-under-bidens-new-plan/?sh=39121d321004
- Rohe, W. M., Key, C., Grinstein-Weiss, M., Schreiner, M., & Sherraden, M. (2016). The Impacts of Individual Development Accounts, Assets, and Debt on Future Orientation and Psychological Depression. Journal of Policy Practice, 16(1), 24–45. https://doi.org/10.1080/15588742.2015.1125329
- The White House. (2022, August 24). Fact sheet: President Biden announces student loan relief for borrowers who need it most. The White House. 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/
- Williams, T. (2022). A 34-year-old accountant who paid off $100,000 in private student loans says they deserve relief too. Fortune. https://fortune.com/2022/08/28/private-student-loan-holder-on-bidens-debt-forgiveness/