Student loan forgiveness proposal brings mixed opinions
January 26, 2021
As America’s 46th president begins his first 100 days in office, he is dreaming big. President Biden’s federal student loan forgiveness proposal is offending some Wisconsinites while others are excited about the possibility of not being required to pay back all their student loans.
“I took out my loans to be able to live and afford the extras not covered by the G.I. Bill, and I have paid a lot over the last decade and will continue to pay,” said Allen Morris of Orfordville, Wisconsin. “But to have this done would be a huge relief and shorten my payoff by about 10 years.”
The student loan crisis and lack of affordable higher education for many Americans was a hot topic throughout the 2020 campaign season. Now that he’s been sworn in, President Biden has proposed a plan to forgive $10,000 in federal student loans for all borrowers regardless of their income. He also proposes to cancel student loans that are tuition-related for people who graduated from public colleges, historically black or minority educational institutions and who earn less than $125,000 per year, according to Fox Business.
“I joined the military to help pay for college,” said Shane Simplot of Beloit, Wisconsin. “Lots of people who come by my office are doing the same thing. My wife is working on paying off her college debt and she thinks [the proposal] is an insult to her hard work.”
As recent college graduates wonder if they should continue to make payments on their federal student loans, it’s important to remember this is still just a proposal. Details of the potential program are still unclear even though America now has a Democratic-controlled House of Representatives, Senate and presidency. If graduates stop making payments only to find out they don’t qualify for a future program, they will have to catch back up on payments. This could also negatively affect their credit scores, causing hardship later when they try to obtain loans.
“This is a slap in the face to every American,” said Dennis Beggs of Janesville, Wisconsin. “This is a form of redistribution of wealth.”
But the issue is more complicated. According to Matt Lewis, American political commentator, a student loan forgiveness program is a bad idea because it would disproportionately help people who are richer and more highly educated, exacerbating income equality. He also notes the moral repercussions of such a program.
“There is a moral hazard associated with allowing people to accrue debt that they are then never required to pay,” he said. “Likewise, diligent students who already made other sacrifices to pay their student loans off will now feel slighted.”
City of Janesville, Wisconsin Economic Development Director Gale Price said it’s important to examine the issue from a bigger-picture perspective. While the concept is great and may allow more cash to be freed up that could be used as economic stimulus in America’s economy, there could be potential income tax challenges for graduates. While those challenges might not be detrimental, they should be a consideration.
More people will benefit from the program if the federal minimum wage isn’t raised, said Price. Since not all college degrees provide graduates with $15-per-hour wages immediately upon graduation, the impact on certain industries such as agriculture, fast food service, retail and landscaping may be quite unfavorable because of limited margin in those products.
“In short, all of this tinkering with stimulus, loan forgiveness, etc. is a tapestry of intertwined causes and effects,” Price said. “The administration should tread lightly and cautiously on the heels of a second stimulus and seeing the vaccine starting its roll out in earnest.”