The Biden administration has recently unveiled a new initiative for student loan forgiveness. In an Aug. 24 press conference, the President announced that he would be using executive action to forgive student loan debts of up to $10,000 for every borrower who makes an annual salary of under $125,000. The bill also provides additional support for Pell Grant recipients, (undergraduates who have demonstrated an exceptional financial need) who are eligible for relief of up to $20,000.
At present, about 45 million Americans owe a total of $1.7 trillion in student loan debt with the average borrower owing a balance of over $37,000, according to the Educational Data Initiative. While some have praised the administration’s initiative as a breakthrough in educational equity, others have questioned its efficacy and its impact on inflation. Due to the amount of USF students who have taken out student loans, the initiative may also have a significant impact on the University’s student financial services.
According to Assistant Vice Provost for Student Financial Services, Angelika Williams, in 2021 USF had 1,215 undergraduate students with an average student federal debt of $21,372 and 1,829 graduate students with an average debt of $82,595. “Students who were enrolled at USF during the summer of 2022 and earlier semesters may be eligible for loan forgiveness if they received a Federal Student Loan on or before June 30, 2022,” Williams said.
Williams explained how the bill addresses college affordability. “The bill intends to provide solutions for reducing loan indebtedness and borrowers at risk of loan default,” she said. “These borrowers are typically low and middle-income families with no other options but to borrow loans if they want to pursue education and obtain a degree.”
Second-year computer science major Frances Lynch has taken out loans for the past three semesters to help cover the cost of tuition. “Each semester since I started last fall, I’ve taken out $2,250 in subsidized loans and $1,000 in unsubsidized loans, so that means not even half-way through my second year I’ve already racked up nearly $10,000 in debt,” she said “The possibility that that $10,000 might be forgiven is huge for me.”
Subsidized loans are loans in which interest does not grow while a borrower is still in school whereas in the case of unsubsidized loans, this interest begins to accrue as soon as the borrower accepts them.
Lynch continued, “College is unbelievably expensive and $10,000 might not be a lot for some people,but it’s truly a large amount of money and lessens some of the burden of college costs.”
Psychology professor Lisa Biesemeyer said that student loans are a “social justice issue.”
“Debt from student loans inhibits many people from repaying other debts, building good credit, buying homes, and generally investing in the economy,” she said. “I don’t think that student loan forgiveness alone is an adequate way to address the problem of college affordability because it doesn’t actually address the costliness of college, nor the student loan industry.”
Biesemeyer continued, “Black and African American college graduates owe more on average than white college graduates, as well as are more likely to struggle financially due to the student loan debt.”
A 2019 study by The Institute on Assets and Social Policy showed that after two decades the median Black borrower still owes 95% of their debt, while the median white borrower has already paid off 94% of their debt. Biesemeyer suggested that the federal government would need to develop new guidelines for making college more affordable in addition to this forgiveness, doing away with the “predatory” student loan industry.
Second-year psychology major Nikki Thomas shared a similar sentiment. “I know so many intelligent, ambitious people who have been discouraged from pursuing higher education because of how ridiculously expensive college is and how hard loans are to pay off due to interest increasing every year,” she said. “Most people take out a lot more than $10,000, so I don’t know how great the impact will be in the long run. I know so many family members who are still paying off the loans they took out ages ago. It’s like there’s no escape.”
In terms of how the initiative will impact financial services at USF, Williams said, “We are not currently seeing any information in the bill that impacts the future state of the Federal Student Loan program. However, we will continue to provide financial literacy information related to the new student debt relief plan from the Biden-Harris administration.”
As the administration’s initiative is still in development, the Department of Education has provided an outline for borrowers looking to claim relief. According to a federal announcement sent out earlier this month, an official application will be launched this October that will allow applicants to expect relief within four to six weeks of submission. In the meantime, borrowers can sign up at studentaid.gov in order to be notified when the application becomes available.
Jordan DelFiugo is a sophomore psychology major and a general assignment reporter for the Foghorn. She can be reached at firstname.lastname@example.org.