GRAND RAPIDS, Mich. (WOOD) — The reactions to President Joe Biden’s student loan forgiveness plan has been mixed.
Wednesday, Biden announced a student loan forgiveness plan that would wipe out $10,000 in federal loans for people who earn less than $125,000 per year. The plan will also wipe out up to $20,000 in federal student loan debt for students who received Pell grants while going to college.
“I’m all for it. I think it would be good for everyone because it’s a lot. A lot of people have a lot of debt,” said Ethan Morgan, a current Grand Valley State University student.
American student loan debt now sits at around $1.7 trillion. Economists say it’s the largest share of debt that Americans hold.
“I went to school for two years and I owe about that much: $10k, $20k,” said Brennen Davis Jones. “I’d be able to pay other things off instead of focusing on student loans.”
Jones said he would like to see Biden go even further and wipe out more debt for students who went to school for more than four years.
While some touted success following the announcement, others were not happy. Several people on News 8’s Facebook post regarding the announcement said they’ve already paid their school loans off. Others said they avoided school because of the costs and shouldn’t be on the hook to now pay for others.
Michigan Republicans echoed those sentiments.
“This reckless act is estimated to cost taxpayers $300 billion and will make inflation even worse for families already struggling to make ends meet,” said Rep. Bill Huizenga, R-Zeeland.
Democrats like Gov. Gretchen Whitmer praised the plan, saying it will have a positive impact on people in the state.
“Nearly 700,000 Michiganders will have their debt cut in half or eliminated entirely, lifting a huge burden off their backs,” said Whitmer.
While the debt is expected to completely rid millions of their student loan debt, economists like Paul Isley with the Seidman College of Business at GVSU say it will have minimal impact in the grand scheme of things.
“It’s not going to make the world infinitely better nor is it going to make the world infinitely worse,” said Isley.
Associate professor Isley said the more than $300 billion price tag expected to come with the student loan forgiveness, represents about 5% to 7% of the U.S. annual budget. Isley said while this is no small number, dollars spent on things like COVID-19 relief, which cost upwards of $5 trillion, stand to make a much more noticeable impact. However, Isley said he does expect prices to rise as a result of the student loan debt forgiveness plan.
“Some estimates I’m seeing right now say 8, 9, 10 million people will have almost their full debt forgiven. That means they don’t have to worry about payments. It means that their balance sheet is all of a sudden gotten better, their wealth has improved and that leads to them spending money,” said Isley.
Isley said because people will be spending more money, there will naturally be fewer goods available. He says similar to what shoppers are seeing now with rising prices, when there are fewer items available that are in high demand, prices will increase.
Isley also said the plan could mean the gap between middle class and those who live below the poverty line will expand. Isley went on to explain while taxes are not likely to rise on the poorest of Americans, the rise in the cost of living will impact them.
“(The debt forgiveness) is going to go to people who have a leg up already but it’s also going to provide a push ahead for young people,” said Isley. “There’s some good to it but there’s also likely some distributional effects that will move stuff from some of the poorest groups, that didn’t go to college/those that have less education, towards those groups that have more money.”
In order to take advantage of the student loan debt forgiveness program, former students will have to apply. The form is not yet available, but you can sign up to be alerted when it is on the Department of Education’s website.