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Economists, organizations react to expected student loan forgiveness

Student Loan Forgiveness
Posted at 7:52 PM, Aug 23, 2022

INDIANAPOLIS — A pause on federal student loan payments is set to expire next Wednesday.

Before then, the Biden Administration is set to announce a $10,000 forgiveness plan.

What we know about expected forgiveness

The Biden administration is set to announce how the country will move forward when it comes to student loan forgiveness and repayments on Wednesday.

There have been no details released on how this plan would work, other than people who qualify will have to make less the $125,000 a year.

How will this impact inflation?

Economists say the average American family is paying roughly $500 a month extra in household expenses due to inflation.

Andrew Butters, an Economics and Public Policy Professor at IU Kelley School of Business said the loan forgiveness could make inflation worse.

"This is by all accounts something that will be supporting demand and likely having an impact on labor supply decisions that might still leave people potentially out of the market,” Butters said. "So those two things in this current environment would potentially make things a little bit worse on the inflation side."

Federal student loan borrowers haven't had to make payments since March of 2020. Butters said while this policy could make inflation worse, it could also help those most in need.

"It's very much possible and likely to be the case that the families that are going to receive this assistance are exactly the ones that are feeling the pinch almost disproportionately as a consequence of inflation,” Butters said.

Will there be more loan forgiveness?

The founder of, a grassroots organization that advocates for student loan relief, says a $10,000 forgiveness is just the tip of the iceberg.

"There is about $30 billion in federal student loan debt hanging around the necks of about a million Hoosiers," Alan Collinge the founder of said.

According to data compiled by this organization,which is based on information from the U.S. Department of Education, about 58% of borrowers weren't paying their student loans before the pandemic.

Other data shows that older borrowers meaning 50 and over outnumber younger borrowers.

The organization feels sweeping reform is needed.

"If you owe less than $10,000 on your student loans you're probably in pretty good shape,” Collinge said. “The people who are hurt worst have seen tens of thousands of dollars in debt explode."

Further steps are being made to lower college costs, loans needed

Collinge’s organization is currently advocating and showing support for S. 2598. The bill would change bankruptcy guidelines. Currently, people who file for bankruptcy aren’t allowed to discharge student loan debt. This bill would change that among other things.

Other organizations, like the National College Attainment Network, say the cost of college needs to be addressed by increasing Federal student aid through Pell grants.

"The Pell grant, which is the cornerstone of the federal financial aid program, used to cover three-quarters of the cost of going to public college in this country,” Catherine Brown, with the National College Attainment Network said. “Today it covers less than a third. In Indiana, less than a quarter of public four-year colleges are accessible for students who are the average Pell Grant recipients. So it’s really becoming very challenging to pay for college and a lot of students have unmet needs.”