TAMPA, Fla. — President Joe Biden announced plans Wednesday to provide $10,000 in student debt cancellation for millions of Americans.
Those with the greatest financial need could receive $20,000 but if your debt wasn’t wiped out with forgiveness, you will soon have a student loan payment, when the freeze ends on December 31.
“We’ve been telling people all along to pretend like you still have those payments. If it’s debt you still want to pay off your debt as quickly as possible. The quickly you can pay off your debt the better off you’re going to be. You’re not paying high interest. But if you’re preparing to go back to that, save as much money as you can between now and the first of the year,” said Kaleb McCarty with Truvestments.
There is a cost to student debt cancellation and that cost will be paid by taxpayers. “On the low end, it’s going to cost our country and taxpayers $300 billion,” said McCarty.
According to the Penn Wharton Budget Model, a one-time cancellation of $10,000 for each borrower earning less than $125,000 will cost the government approximately $300 billion.
Despite fears that loan forgiveness will fuel inflation, economists tell ABC Action News the impact will be minimal to the economy.
“It’s no longer the case that whoever I took the loan out from, that’s necessarily who’s going to get my payments. A lot of the times, it’s going to go towards investors,” said USF Professor of Economy Mike Snipes. “The whole reason why you hear this argument that this is going to be bad for the economy; that this is going to be bad for Wall Street, is because while you’re taking $10,000 and you’re lowering the principal by $10,000, that’s going to affect the value of the investments that these investors have made, but they’re investing in your debt.”
Student loan debt is now the second-highest consumer debt category in the U.S., as the cost of college has steadily increased.
“Florida is one of the few places that offers state funding for colleges, in reference to Bright Futures,” said Tyler Tazwell.
Tazwell is the college and career counselor for Middleton High School in Tampa. She said even with the Bright Futures program, which pays for tuition, some students still cannot afford to go to a state university because of other costs, including housing and transportation.
“I have parents where they say, ‘unfortunately Ms. Tazwell, I’m so excited that my child was accepted to this university, and I never thought it would happen, but I simply can’t afford it even with additional funding, scholarships etc.’ Therefore, I will offer up our community colleges and those pathways,” Tazwell said.
Currently tuition at the University of South Florida for in-state residents is $6,400.
“For the state university system institutions, we haven’t had a tuition increase in many, many years… eight coming up on nine years,” said USF Associate Vice President for enrollment planning and management, Billie Jo Hamilton.
However, the total cost of attendance at USF is around $23,000. Hamilton said financial aid award packages are available to help cover that. She advises students to apply early.
“If a student applies on time and they’re highly needy and they’re qualifying for scholarships, we pretty much get them up to everything, but a little spending money. They can get that through loans and work study,” Hamilton said.