Student loan forgiveness was not a part of the $1.9 trillion-dollar COVID-19 relief package signed by President Biden, but advocates of the move are hopeful. The law does include a broad tax exemption that would cover discharge of some debt through the end of 2025.
“It’s very stressful for so many people to have this much debt, and for many, to not be making any progress paying it down,” said Ashley Harrington of the Center for Responsible Lending.
Some advocates of student loan forgiveness see widespread debt cancellation and believe it could be a stimulus of its own.
“The domino effect has been that when people have high student debt payments — $1000, $2000 per month — they can’t buy houses, they can’t buy cars, they aren’t able to make purchases to help that small business out,” said Natalia Abrams of the advocacy group Student Debt Crisis.
Critics of loan forgiveness point to studies like a Goldman Sachs analysis that found that forgiving $10,000 per borrower would add less than one-tenth percent to the U.S. GDP. Others argue that more cancelation than that could reward too many borrowers who don’t need the help.
With over 45 million Americans carrying student loan debt, forgiveness could level the playing field for those who do need to borrow, especially people of color who lean more on these loans for their higher education, said Harrington.
“There are so many Black and Brown families who make a “middle-class” income but are unable to live a middle-class lifestyle,” she said. “Student debt is holding them back from doing all of the things we associate with the middle class — buying a house, starting a business, saving for retirement.”
