Would $50,000 in Student Loan Forgiveness Really Be Better Than $10,000?
It might not make as big of a difference as you think, according to CNBC.
“All you need is the flick of a pen,” the Senate’s top Democrat, Sen. Chuck Schumer of New York, recently said about the President forgiving student debt. “You don’t need Congress.” Senator Elizabeth Warren has called student loan forgiveness “the single most effective economic stimulus that is available through executive action.”
Furthermore, more than 325 organizations and nonprofits have called on the Biden Administration to cancel student debt through an executive order. More than 1 million individuals signed a petition titled “President Biden: Cancel student loans in the first 100 days.”
However, there are many critics of the plan stating that student debt forgiveness wouldn't stimulate the economy as intended. College graduates tend to make more money and would most likely save the money not spent on student loans rather than spend it. The counter-argument states that low-income borrowers, women, and people of color are struggling with student loans and would benefit from the forgiveness.
President Biden has not condemned the option of issuing an executive order that would cancel some portion of student debt for borrowers. “The President continues to support the cancelling of student debt to bring relief to students and families,” White House press secretary Jen Psaki tweeted on February 4. “Our team is reviewing whether there are any steps he can take through executive action and he would welcome the opportunity to sign a bill sent to him by Congress.”
So what's the difference between canceling $10,000 or $50,000?
Currently, the student loan balance is around $1.7 trillion. According to expert Mark Kantrowitz, if all federal student loan borrowers had $10,000 forgiven, the outstanding debt total would fall to $1.3 trillion with 14.4 million individuals, or about 33 percent of borrowers, seeing their balance fall to zero.
Canceling $50,000 for all borrowers would bring the outstanding debt total to $700 billion, a decrease of $1 trillion. This amount of forgiveness would result in 36 million individuals, or 80 percent of borrowers, seeing their balance fall to 0.
So yes, there is a major difference between forgiving $10,000 or $50,000 worth of loans for student borrowers. However, many of the individuals with larger balances are higher earners that have earned several degrees and accumulated debt through the process.