US student debt relief program plan halted, borrowers’ future uncertain

President Biden’s student debt relief program has had an eventful rollout, leaving borrowers across the country uncertain about the status of their loans. As two Supreme Court cases await decision this summer, and the potential end of the COVID-19 declared state of emergency looms, which would likely end freezes on loan payments, questions are being raised about the future of student debt in this country. Here is a rundown on what Lewis & Clark students should expect. 

According to the official White House website, the current proposed plan would offer Americans earning less than $125,000 per year (about 95% of Americans meet this criteria) to seek loan forgiveness for up to $10,000, with recipients of federal Pell grants (predominantly lower-income, who earn less than $75,000 per year) receiving the most relief, at up to $20,000 in loan forgiveness. 

 Upon the program’s opening, 26 million Americans either actively applied for relief or were deemed automatically eligible. According to the White House’s official tally, Oregon alone had 329,000 applied or auto-eligible borrowers, 211,000 of whom received full approval and were sent to debt-collecting institutions. 

However, four weeks after the applications were opened, opponents of the program filed two separate briefs to stop debt relief from moving forward. Both lawsuits, which are set to give oral arguments to the Supreme Court on Feb. 28, challenge the authority of the HEROES Act which President Biden’s plan relies on. According to, the Health and Economic Recovery Omnibus Emergency Solutions Act grants emergency economic powers and funds to the federal government while the COVID-19 pandemic is still designated a national emergency.

Although the Justice Department and White House have maintained their stance regarding the legality of the plan, until the lawsuits are put to rest and the judicial orders overturned, applications are no longer accepted. Moreover, pending and approved applications have been frozen. Even if one has been granted debt relief, they are unable to receive it. 

Borrowers took out these loans to pursue undergraduate and graduate studies, as prospective earning potential grows with increased college education — according to The Economist, having had some college education increases average income by 11%, and a completed Bachelor’s degree sees an increase of 65%. The United States Federal Reserve calculates that U.S. students and graduates collectively owe $1.76 trillion in student loans.

This huge balance being partially forgiven has made many economists leery of the proposed debt relief program. Potential long-term damage from accelerating inflation is of great concern, and so is the impact to the housing market. Those potential benefits to wages make college-educated Americans more likely to be homeowners, but the costs of debt forgiveness could be passed along to the housing market, specifically mortgages. 

Associate Professor of Economics Eric Tymoigne disagrees. He referred to Bard College’s Levy Economics Institute and the paper “The Macroeconomic Effects of Student Debt Cancellation,” explaining that their findings supported the conclusion that debt relief might have positive outcomes.

“The Levy Institute published a very interesting report recently by Scott Fullwiler and Stephanie Kelton,” Tymoigne said.  “(It) said debt relief would actually be a good thing for the economy. The less debt people have, the more money they spend. Millennial home ownership is far lower than older generations.” 

Furthermore, Fullwiler’s report agrees that student debt relief would have minimal impact on the inflation that continues to plague American consumers, as some economists have speculated. Associate Professor of Economics Clifford Bekar weighed in on the matter.

“Theoretically yes, but I don’t think it would be much of an issue,” Bekar said. “There is an intellectually dishonest take on this, where we can consider debt relief a transfer payment. If you increase purchasing power, you increase aggregate demand. If debt forgiveness increased household incomes in that way, it could increase inflation. But debt is a liability, and every liability to you is an asset to someone else. So the two cancel each other out – the borrower has more in assets, but the bank has $10,000-$20,000 less per forgiven asset.” 

Inflation is a major concern for American consumers, as household necessities have risen dramatically in cost without significant change in average household income. Opponents of debt relief raise real concerns over a potential increase in spending power continuing to put pressure on prices, as individuals with more money are willing to spend more on necessities and luxuries alike. 

“Current inflation is not demand-driven, it’s a supply-side issue,” Tymoigne said. “And it’s actually going down as China opens up. Currently, the largest issue driving inflation is the war in Ukraine. They are a major exporter of grain, and that’s been disrupted. Hopefully, when the conflict ends, inflation should steady itself.”

This country’s continued shifting landscape of financial decisions and debt relief is a significant cause of concern for many young people. As global financial systems continue along the slow path to recovery in many young people are questioning the necessity of long-term student debt.

Subscribe to the Mossy Log Newsletter

Stay up to date with the goings-on at Lewis & Clark! Get the top stories or your favorite section delivered to your inbox whenever we release a new issue. 

Be the first to comment

Leave a Reply

Your email address will not be published.

AlphaOmega Captcha Classica  –  Enter Security Code