On August 25, 2022, President Biden launched a plan to eliminate substantial amounts of student loan debt for numerous young Americans. He said he would waive $10,000 in debt for people who are earning under $125,000 annually, and $20,000 for those who had obtained Pell grants for low-income households.
While giving remarks at the White House, Mr. Biden stated, “All of this means that individuals can start to finally climb out from beneath that mountain of debt and finally think about buying a shelter or investing in the business.”
After months of debate about fair trials and concerns that the proposal may worsen inflation before the midterm elections, the White House finally decided to cancel the debt.
According to The New York Times, Susan Rice, Biden’s domestic policy adviser, said that the total cost of the student debt relief had not yet been estimated by the administration, because the figure would depend on how many individuals requested it. Nonetheless, Rice estimated that the total expenditure would be at least $300 billion. This estimate alone surpasses the total amount of federal expenditure spent on education in 2021, which was $296.6 billion.
The CNN reported that nearly 8 million borrowers might become immediately eligible for automatic debt forgiveness because the Department of Education already has information about their income. As regards the remaining students, the Biden administration will be launching an application in the coming weeks for borrowers to submit their financial information. As per the latest update from the Federal Student Aid (FSA), the application will be accessible to the borrowers, prior to the expiration of the federal student loan repayment moratorium on December 31.
The President has been coming to grips with how to handle America’s student debt issue for months. Indeed, student debt is a big problem in America that cannot be easily overlooked. According to findings published by the BBC, student loans currently comprise the second largest segment of total household debt in the US, comprising nearly 10% of the total figure.
Moreover, the White House reported that Black borrowers are disproportionately burdened by student loan debt. According to their figures, the typical Black borrower who started college in the 1995–96 academic year was still liable for 95% of their first student loan, twenty years after their total tuition costs. From this viewpoint, Biden’s choice was likely influenced by progressive Democrats, who believe that debt forgiveness is important to help mitigate racial inequality in the economy.
However, some also raised the point that broad debt forgiveness is unfair to those who have already had to make huge compromises to pay off college debts. Additionally, some economists are worried that debt relief may increase inflation because the money that had originally been saved to pay off the debt would suddenly become disposable income. On the other hand, maintaining debt, in the long run, lowers the amount of money that indebted people can spend on goods and services, which in turn limits the national economy.
Political analysts view this situation from another angle, declaring that Biden’s resolution was adopted in order to mobilize supporters ahead of the November midterm elections and boost the participation of millennials. This viewpoint is supported by the fact that more than half of Americans with school debt are under the age of 35.
Furthermore, Biden has made other attempts during his time in office so far to win the youth of America over. Democratic pollster Ben Turchin told the BBC that the president's popularity amongst Millennials and Gen-Z’s has increased as a result of recent initiatives on abortion, climate change, and now student loans.
Both sides of the story reveal the twin agendas of the US president ahead of the mid-term election and the anticipated economic scenario. Let’s see if this bill, in providing direct aid to students struggling with debt, will benefit the Biden administration and the US economy, or if the negative, long-term consequences of such a decision will outweigh the immediate advantages.
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