Author: Everleigh Connely
The student loan forgiveness plan, mostly for low- to middle-income borrowers, is a long-awaited promise President Biden made during his campaign.
After months of deliberations, the president recently announced his plan: wipe out a significant amount of student loan debt for Americans.
According to the announcement, the plan includes forgiving $10,000 in debt for borrowers who earn less than $125,000 per year.
Meanwhile, low-income families who received Pell grants can have $20,000 debt forgiveness. That sounds like a great help, right? However, there’s some fear that the plan will only aggravate inflation.
Even with some negative thoughts about student loan forgiveness to low- to middle-income borrowers, President Biden stands firmly and gives a robust defense about his plan that it can really help people to climb out of the mountain of debt and help the economy better. However, the timing for the debt relief is still not decided, but the Department of Education stated that the application might start by the end of the year.
How many households could benefit from debt relief?
Based on estimation, about 19% of households that earn less than $125,000 and have student loan debt could benefit from the debt relief plan. If you think about the numbers, President Biden’s plan does not cover a significant number to actually reach his target results.
About 81% of households earning less than $125,000 but not having student loan debt will not benefit from the plan. Basically, many will =be left out of the debt relief plan.
How much of the student loan debt could be canceled?
As mentioned above, $10,000 student loan debt will be canceled for each borrower who earns less than $125,000 a year.
The forgivness program is estamated to cost the federal government $298 billion.
The process for borrowers to claim the debt relief will be handled by the Department of Education; the plan is to create a simple and quick application process. What’s great about the plan is that it will not be treated as taxable income.
No doubt, there’s no such thing as a perfect plan, as some loopholes and unfairness can be the issues. This exactly describes the debt relief plan of President Biden.
Critics said that it would be unfair to those who just endured and tightened their belts just not to resort to getting federal student loans. Also, it might be a little unfair to exclude wealthier borrowers.
More than that, many think the debt relief plan is a slap in the face for people who did not go to college because of financial troubles and for those borrowers who upheld their responsibilities and paid back their student loans.
Meanwhile, about 43 million borrowers will still be left out even after the broad student debt forgiveness plan.
That’s why many believe that the debt relief plan will just exacerbate inflation. Of course, many supporters positively see the president’s plan as a good thing other presidents failed to do: giving help that directly relieves the lives of working people.
The result that President Biden expects with his debt relief plan might also happen. With many speculations, it is still hard to see what would actually happen after the loan forgiveness, especially since it is still uncertain when it will start.