CENTER VALLEY, Pennsylvania – Is Student Loan Debt Relief a Key Tool in Boosting the Economy? The question seems to be a question of “when” rather than “if”.
President-elect Joe Biden seems to think so. He publicly advocates canceling $ 10,000 in loan debt. The Biden plan would also make payments proportionate to income and offer even more forgiveness for those who get into public works.
Student loan debt has grown exponentially over the past 20 years and is now more than $ 1.5 trillion.
“Since the cost of higher education has essentially doubled since the 1990s, we’ve seen a much higher percentage of those applying for FASFA who need to apply for the federal direct loan program,” said Joyce Farmer, Financial Aid Director at DeSales University. “Government funding for higher education has declined and costs have increased.”
“I think we are at a breaking point where it will be really detrimental to the economy,” said Farmer.
However, a new forecast from Goldman Sachs throws some cold water on the fact that forgiveness won’t have an immediate impact on the economy. “Immediately” is the keyword here.
“It’s part of our national debt. If you look at it holistically, I think it would be beneficial to reduce it,” says Lehigh University economist Chad Meyerhoffer.
He says the long-term benefits are worth it, and he believes it will have implications for the immediate future.
“There is potential to stimulate the economy in terms of consumer spending,” said Meyerhoffer. “It also enables students to take on other types of debt that can lead to greater personal wealth.” Like owning a home, buying a car, or saving up for retirement, but that’s more of a long-term economic boost.
DeSales University economist Kamran Afshar believes there are probably better ways to get the economy going quickly, such as sending out more business stimulus checks.
“If we are looking for a quick effect now, this is not the quickest way,” said Afshar. He also sees the long-term benefits.
“Something like this will pay off multiple times over time,” said Afshar. “They’re more likely to buy a car or a house, go out to restaurants, that sort of thing. This is a clamp that prevents them from doing many of these things. “
Those with college debts like Zachary Schur and Rebecca Ditmar think they’re going to spend the money now.
“It’s a lot easier to justify [purchases] “If you don’t have that additional student loan payment every month,” said Schur, a graduate of Mühlenberg College. “It would enable me to move out sooner and thus contribute to the economy.”
“If that were less, it would definitely help with all other aspects of life,” said Ditmar, a junior at DeSales with three jobs. “A plan like this would definitely be significant.”
“My stress level from keeping my working hours, studying and everything is outrageous,” said Ditmar.
When forgiveness is not included in a new incentive, some, like Senate Minority Leader Chuck Schumer and Senator Elizabeth Warren, urge immediate action. They recently wrote a comment asking the president-elect to give up to $ 50,000 through the Higher Education Act of 1965.
That would likely be challenged in court. It is unclear whether the order will last.