US Treasury Secretary Janet Yellen says large-scale student loan relief could be good for the economy.
Here’s what you need to know — and what it means for your student loans.
During testimony on Capitol Hill on Tuesday, Yellen said:
- “[Student loan relief] could be good for the economy”;
- “Student debt is a significant burden for many people, especially those who find themselves on low incomes”;
- “A lot of people don’t finish school, and that’s a huge problem”
- “[Canceling student loans] would provide more resources [for entrepreneurs to start a business]”;
- “There are compromises to be made [with student loan cancellation] that must be analysed”; and
- “Certainly, we will support whatever policy President Biden decides, and he is considering how he wants to address student debt.”
Student loan relief: impact on the economy
Sen. Elizabeth Warren (D-MA), a leading congressional advocate for large-scale student loan forgiveness, has argued that student loan forgiveness stimulates the economy. The argument is this: if people don’t have to pay student loans, they can spend the money in other sectors of the economy. Warren says large-scale student loan cancellation is also freeing a generation of student borrowers from the shackles of student debt. Without crushing debt, Warren says, people can get married, start a family, buy a house, save for retirement and start a business. While progressive Democrats support the economic and social benefits of student loan forgiveness, not everyone agrees. For example, congressional Republicans say large-scale student loan cancellation will hurt the economy and increase inflation. (A new proposal would prevent Biden from canceling student loans). Senator Tom Cotton (R-AR
Biden student loan forgiveness: What’s next for student loans
Biden, who has canceled $17 billion in student loans since becoming president, is considering enacting large-scale student loan cancellation. Importantly, Biden did not say he would cancel everyone’s student loans, or that he would cancel all student loans. If Biden cancels student loans, canceling student loans could mean the end of student loan relief. Biden could also limit student loan forgiveness in several ways. This leads many student borrowers to wonder if they will be eligible for student loan forgiveness. For example, Biden could limit student loan forgiveness only to federal borrowers, borrowers with student loans, low-income borrowers, borrowers who did not graduate, or Social Security recipients whose salaries are seized to pay student loans.
Notably, any student loan cancellation would be a one-time student loan cancellation. This means that many student borrowers will still have student loans after any student loan forgiveness. That’s why it’s essential to plan your student loan repayment now. Evaluate all of your options based on your financial situation. Consider these popular strategies for paying off student loans faster: