Students, experts uncertain over latest loan forgiveness developments
President Biden announced an additional $9 billion in student loan forgiveness.
By MARCEL LACEY & SPARSH SHARMA
The first week of October ushered in two milestones of opposing outcomes for student borrowers. On Oct. 1, for the first time since the incidence of the coronavirus pandemic three years ago, college-goers had to resume repaying their federal student loans to the government. Then, the Biden-Harris administration announced its newest plan Oct. 4 to forgive another $9 billion in student debt — this time targeted toward experienced public service workers.
The Department of Education will distribute $5.2 billion of the $9 billion to existing public service loan forgiveness programs, affecting public service workers, such as U.S. government employees and those who work in emergency services and public safety. Another $2.8 billion will be allocated to existing borrowers who have been repaying loans for 20 years and did not receive the loan forgiveness they were entitled to because of historical administrative inaccuracies.
However, following a tumultuous year for higher education financing in which the Supreme Court threw out Biden’s previous plan to eliminate more than $400 billion in student debt, Robert Dekle — a professor of economics and a supporter of the newest student debt relief plan — characterized Biden’s latest move as “patchwork.”
“It’s great for the people who suffered from government bureaucracies and the slowness of it … [but] it’s not a policy home run,” Dekle said.
The Biden-Harris administration has provided student borrowers, who now have to resume repayments, with some wiggle room. Those who miss a monthly payment from now until September 2024 will not be considered delinquent, and the balance will instead be tacked onto the end of the borrower’s loan term.
Approximately one-third of USC’s students rely on federal student loan programs to some extent. Among them is Emmie Ahmed, a senior majoring in international relations and the global economy, who said she is bemused by the saga surrounding debt forgiveness.
“I wasn’t really counting on the government to come through with the [$400 billion] plan anyways, because I know how radical it is,” Ahmed said. “I’m not surprised that it didn’t.”
For Victor Torres, a senior majoring in business, the saga has meant some of his friends at other universities have had to make uncomfortable decisions.
“I knew some people [who] went back to school purposely [under the impression that their loan would be forgiven],” Torres said. “Some of them even had to drop out of the university, or some of them were in community college and can’t do it.”
Torres, who said he would have relied on federal student loans to fund his studies had he not received a scholarship from USC, also said that while he believes the Biden-Harris administration should continue forgiving student loans, he “doesn’t think that’s gonna happen.”
THE PROPOSAL
According to the Biden-Harris administration, the newest bout of debt forgiveness should bring its proposed debt relief to a total of $127 billion for just under 4 million Americans of all ages.
“A better solution would be to make the cost of attendance lower, and to make it so that the middle class isn’t paying that much to go to school,” Ahmed said. “That’s a long term solution rather than just putting a Band-Aid on.”
While the newly relieved $9 billion will have a “negligible” effect toward the national economy, Dekle said, he also believes that a potential future loan forgiveness program similar to Biden’s initial ambitious plan would be a mistake. The Federal Reserve maintained its interest rate for the first time in months while worries of a recession are being fanned by investors. Student loan forgiveness may act as a stimulant to the economy that would drive up prices.
“The economy is overstimulated and we have high inflation, so we need to weaken the economy,” Dekle said.
