President Biden had hoped a massive student loan forgiveness program would be one of his signature achievements, but the courts have blocked his plan to forgive up to $10,000 of federal college debt for millions borrowers (and up to $20,000 for Pell Grant recipients).
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The Supreme Court is keeping the program on ice until it hears the case in February, but Biden is fixing a 6-3 conservative majority — and the plan’s supporters aren’t optimistic. Is it a good thing that the presidential student loan forgiveness plan will likely die in court, or will the economy benefit if it somehow survives? Let’s explore the question and the possible outcomes.
Unsurprisingly, Americans do not agree on the subject
A new GOBankingRates survey of more than 1,000 American adults reveals a wide variety of opinions on the subject.
About 44% think canceling student loans would only have a minor impact on the economy, with a roughly even split between those who think a minor impact would be good or bad. About 16% expect it to have no impact.
The remaining 40% believe canceling university loans would have a major economic impact – 24% fear it would cause significant damage and only 16% believe it would bring significant benefits.
According to the US Census Bureau, about 38% of the country has earned a bachelor’s degree or higher. This is almost identical to the roughly 39% of respondents who think the economy would benefit from canceling student debt.
Also unsurprisingly, older Americans — those least likely to have gone to college and most likely to have paid off their loans if they did — are by far the group that most opposed to the plan. Those most in favor of it are the 25-34 age group, who hold most of the country’s student debt.
Now let’s get to what the experts think…
It’s a hard sell for America’s majority without a degree
The Congressional Budget Office (CBO) estimates that Biden’s plan would cost $400 billion in taxpayers’ money. It’s a hard pill to swallow for the countless people who skipped college because they weren’t sure the return on investment from the degree would ever exceed the debt required to get it.
Biden’s plan requires them to pay for others to graduate, but avoid the bill.
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“I think student loan forgiveness is generally not good for the economy, or society in general, because it sends the wrong message,” said Andrew Griffith, CPA, associate professor of accounting at LaPenta School. of Business from Iona University.
In October, Intelligent.com published a widely circulated study that did not help the administration’s case. It revealed that nearly three in four loan forgiveness applicants planned to use the money for non-essential things like vacations, new smartphones and even drugs and alcohol.
“I don’t think canceling student loans would make the economy stronger,” said Tom Siomades, chief investment officer of AE Wealth Management. “Most student loan holders said they would use the ‘extra’ money for travel and dining out. This goes against the reasons given for the cancellation of the loan, namely that the loans were a financial burden preventing the borrowers from moving on with their lives and buying a house or getting married and starting a family.
Siomades also argued that a $400 billion injection of what recipients consider to be found money could add inflationary pressures to all the bad segments of the economy – including airlines, hotels and hotels. restaurants.
Millions of struggling people would get real long-term relief
On the other hand, proponents argue that the country needs an educated population to compete in an information-based global economy, and that years or decades of debt should not be the only path to jobs in the new economy.
Supporters say Biden’s plan only benefits low- and middle-income households, and that while there are billions available for things like farm subsidies that make fresh vegetables expensive and corn syrup high cheap fructose content, so why not invest in ordinary people?
“The government bailed out automakers, airlines, banks, etc.,” said Jay Zigmont, Ph.D., CFP and founder of Childfree Wealth. “Why not bail out [people with] student loans? While I disagree with how they approached forgiveness, the average American needs a break.
Sarah Jane Paulson, CFP, founder of Valkyrie Financial, sees many millennials she works with miss important financial milestones due to college debt.
“In my view, student debt relief is crucial for the next 60 years of our economy,” she said. “If we see a recession in 2023, freeing borrowers from their student loans will unlock a flood of money that could certainly benefit our economy.”
Even opponents agree the system needs to change
Most experts on both sides have agreed that the current system is unfair, inequitable and unsustainable – even if they disagree on how to fix it.
“What we really should be doing is tackling rising tuition fees and the need for student loans first,” Zigmont said. “But for now, we can at least give people some respite. If we can’t forgive, we probably need to revise the bankruptcy rules to allow easier discharge of student loans.
Griffith thinks student loan forgiveness should only be available to those who intentionally pursue a career path with below-market wages that serves the public, such as a government agency or nonprofit that focuses on service. to the disadvantaged.
But he, too, thinks the system is fundamentally flawed.
“The nation must take responsibility when regulatory oversight of one aspect of our economy fails to protect those exploited by its predators. In this situation, a government agency should step in to right the wrongs of the victims and they should change the regulatory environment to prevent this from happening again,” he said.
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This article originally appeared on GOBankingRates.com: Student loan forgiveness: Americans are divided on how it will affect the economy, but here’s what the experts say
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