According Education Data Initiativean organization dedicated to compiling statistics to promote discussion about education, this is the amount of collective federal student loan debt among 43 million borrowers – approximately $37,667 of debt per borrower.
That’s enough to buy a used car with cash and there’s about $5,000 left over, not including accrued interest.
President Joe Biden announced On August 24, the federal government will cancel student loan debt “to address the financial damage of the [COVID-19] pandemic, fulfilling the President’s campaign pledge.
Ball State economics professor Cecil Bohanon said the move would shift the debt burden from borrowers to the US government. The government will have to recoup the costs in some other way, such as cutting spending, raising taxes, or borrowing more money.
“Are you really advancing the economy by robbing Peter to pay Paul?” he said. “In macroeconomics, it’s hard to see that having much effect.”
Bohanon also cites the economic concept of moral hazard, according to which people will walk away from monetary risks that they cannot manage. He said the student loan forgiveness initiative could distort the risk and reward factor of taking out federal student loans.
“There is no guarantee that they will [forgive student loan debt] again,” he said. “But if they do it once, you kind of think, ‘Well, maybe they can do it again.’ This should send a signal: if you go into debt, the government can come and help you.
The Indiana Department of Revenue told the Associated Press On Tuesday, Indiana residents will be required to report any amounts of canceled student loans as taxable income, which will result in up to $323 in taxes at Indiana’s state tax rate of 3 .23% (up to $646 for Pell Grant recipients with $20,000 awarded). County taxes will also apply.
Emmy Winter, a theater technology and design major, has taken out about $15,000 in student loans over two years and can get two-thirds of it, but she doubts the debt forgiveness plan is feasible.
“[Biden] has been saying that a bit since he was elected two years ago,” she said. “…a lot of senators said, ‘We’re going to cancel student debt.’ But with all these years of saying that, nothing was done, and [the President] still seems no closer to canceling student debt than when he was elected.
She still welcomes the idea of having her debt forgiven, saying she worked hard to graduate and still plans more hard work after graduation.
“Yes, I have a house, and I’m pretty ok with paying for school, but there’s still a lot more I have to pay for when I’m out,” Winter said. “There is a lot of pressure for me to find a job immediately after leaving school, so that I can start paying these [debts] stopped.”
Winter also said she will have more pressing issues than paying off her student loan debt when she graduates, which will always affect how quickly she can get out of student loan debt.
“Do you know how much a box of pasta costs? In Pennsylvania it was $1.22,” she said. “It’s supposed to be a dollar. As much as I hate being in debt, I feel like the cost of living is a much bigger issue. Loans are not right in front of me. It’s the grocery store shelves saying the prices are higher that I’m concerned about right now. »
Sophomore KC Weaver, a computer science and creative writing student, has another view, saying the initiative will encourage more people to go to college, even for jobs that don’t pay high salaries. .
“Social workers and teachers and things like that, even the value of art in a society is super, super important. Due to the structure of our economy, we do not reward them directly in cash,” they said. “But often it can take so much work to get through college programs, and they end up with so much debt.”
However, they do not believe that canceling student loan debt is enough to support low-income Americans as the initiative calls for.
“[Communities] will put money back into big high schools or colleges, but not give back as much money to … poor neighborhoods or neighborhoods plagued by violence,” they said. “Injecting money into, for example, systems for people who don’t or can’t go to college, like trade schools, helps find jobs for everyone and ensures that they have resources.”
Isabella Stratton, meanwhile, is a sophomore in studio art who views President Biden’s initiative as good news. Although the benefits won’t apply to her, Stratton says forgiving student loan debt gives people more agency to pursue a college education.
“[The initiative] kind of takes away that class exclusivity and allows people to not be left out of their current financial situation when it comes to having… better opportunities for the future,” she said. declared.
Contact Miguel Naranjo with comments via email at [email protected] or on Twitter @naranjo678