Biden’s student loan relief plan

Supreme Court weighs constitutionality of debt forgiveness

Anjali Dalal-Whelan / Asst. News Editor / The USD Vista

Student loans are a topic all too familiar for many college students, especially in America. In August of last year, President Biden released a plan to ease the burden of student debt for 43 million borrowers. This plan would forgive $10,000 in federal student loan debt for individuals who make under $125,000 or households that make under $250,000, with an additional $10,000 forgiven for Pell Grant recipients. 

Student loan forgiveness was a vital component of Biden’s presidential campaign and has been a hot debate in the past few years, as college tuition continues to rise. According to NPR, critics of student debt relief say that it could lead to increased inflation. Some also believe it’s not fair to those who worked hard to pay off their debt on their own. 

At the end of February, the Supreme Court started hearing arguments on the legality of Biden’s student loan relief plan. Challenges came from six Republican-led states, as well as two students. The challengers argue that the president would need authorization from Congress to enact such a significant policy. According to PBS News Hour, the conservative justices on the Supreme Court, who hold a 6-3 majority, appear to side with the challengers, while the liberal justices believe that Congress already gave authorization to the executive power to make adjustments to student loans. The decision is expected to be announced at the end of June when the Supreme Court ends its session. A pause on student loan payments that began during COVID-19 is also expected to end mid-summer, after being extended several times. 

The Georgetown University Center on Education and the Workforce calculated that the average price of college tuition, room, board and fees rose 169% from 1980 to 2020. The report states, “It used to be possible to work one’s way through college; today, college costs are generally too high — and young people’s wages too low — for that to be feasible. Consequently, more students have to take on larger amounts of debt to get a college degree.” 

         As a private university, USD’s tuition is well above the national average; however, according to the University of San Diego website, over 78% of undergraduate students receive financial assistance such as scholarships and need-based financial aid. Still, the average student loan debt USD students owe after graduating is $25,208. 

USD junior Kehra Mctague heard about the relief plan and reacted positively to the idea of the Federal government canceling student loans. 

 “From personal experience I would love that because I do have loans out right now.” Mctague said. “So I think that would be a great thing for students, to not be drowning in debt after college.” 

USD junior Paxton Earl acknowledged pros and cons to Biden’s student loan relief plan. 

 “I think the relief plan is a double-edged sword. The benefits of it are that it can increase consumer spending, reduce financial stress and in general provide more financial support and affordability for college students after they graduate,” Earl stated. “However, there are very significant macroeconomic effects that are costly. Student loan relief comes at the expense of the government, which means it also comes at the expense of the taxpayer: us.”

 Earl also is worried the plan would continue to increase college tuition in the future.

 “If the government promises to pay for part or entire parts of the cost of college, then universities can raise their prices, because the cost is not borne by the student but on the government, since it promised relief. Also, if students have their loans forgiven, this will also incentivize students to take on additional debt. This increase in demand for debt could increase student loan interest rates.” 

USD Economics Professor Stephen Conroy added to the possible negatives of the program.       

“This is not a funded program so it will simply transfer debt from private households to the public debt, which we will all be responsible for. In that sense, it is a tax on households that either already paid off their student loans or that never got them in the first place. There is a fairness issue here, as some individuals may have made their college decisions in the past based on tuition costs and would, justifiably, feel anger or resentment that they made sacrifices in the past and are now paying this tax while others who did not make the same sacrifices are rewarded.”

Dr. Conroy added that there is also a risk of short term inflation. 

“In terms of the macroeconomy, in the short term, it would also likely contribute to higher aggregate spending, which is potentially very inflationary.” 

College comes at an enormous cost. If federal loan forgiveness takes place, it could ease the cost of education for millions of Americans, however the full impacts of the policy may not be fully understood until it’s instated. 

The USD Vista reached out to the Office of Financial Aid for comment about student loan forgiveness and opportunities to relieve student debt, and director of financial aid Kellie Nehring said she would not be able to provide any information to the Vista at this time.