Student loan debt has been a financial crisis for millions of Americans throughout the past decade with public college still becoming more unaffordable due to many years of funding cuts despite the state’s recent investments. According to University of Wisconsin-Madison’s Student Success Through Applied Research, approximately 715,800 Wisconsin residents, which is about 23 percent of the state’s 3.1 million labor force, have federal student loan debt. The combined amount of debt borrowers in the state owe is more than $23 billion with the amount per borrower averaging more than $30,000, further burdening the next generation of workers from achieving their financial goals.
Last month, along with extending the current payment pause to December 31, 2022, President Biden announced his student debt relief plan for low to middle income borrowers. If a federal loan borrower earns less than $125,000 a year (less than $250,000 for married couples) they can receive $10,000 in student debt relief or $20,000 if they ever received a Pell Grant while in college, which is a need-based federal aid that is awarded to low-income students. Those who oppose the plan, and might attempt to stop it, are mostly Republicans like the Wisconsin GOP Party, who criticize how “unfair” the plan is to those who did not attend college or paid off their debt.
However, the narratives tied to these criticisms do not carry substantial weight. The idea that the relief benefits rich and affluent college graduate elites invalidates and erases those who actually benefit from this targeted relief. A large portion of those who would benefit from the relief received Pell Grants, which again is only given to those of low income who still cannot afford to go to college without taking out a substantial amount of loans unlike many of the same critics who were able to go to college when it only costed a few hundred dollars a year to attend.
Among these borrowers, one out of three never obtained a bachelor’s degree and the majority of those who did still make less than $75k a year which is nearly 90 percent of who would benefit from this plan. It also helps communities of color like Black borrowers who are disproportionately burdened by student loan debt since many of them were told for decades that one of the only avenues to having a better life was going to college.
The argument that relief will raise inflation rates also seems questionable since both economists and Ali Bustamante, of the Roosevelt Institute, do not believe it will do much to affect inflation. Inflation this year has been an issue while borrowers were already free to not pay off their loans due to the current pause and the relief does not put money in borrowers savings accounts. Those few graduate school borrowers who have a six figure salary still hold more debt than the potential $20k loan forgiveness could relieve and would still be making payments after the pause ends.
Finally, the criticism that this makes Americans who did not go to college have to pay for this forgiveness through taxes seems to depend on individual states. According to the White House, The American Rescue Plan of 2021 makes any student loan forgiveness tax free through 2025, which would cover Biden’s new plan. So while there would be no federal tax, Wisconsin residents will have to keep watch on what local officials will do since, as of the time of this writing, the state is one of few that are still currently in line to tax student loan debt forgiveness.
Biden’s plan comes as the total outstanding debt among all Wisconsin borrowers is $24.2 billion according to Student Loan Hero by LendingTree. The state also has an overall 14 rank by WalletHub in terms of most student debt in the United States and an average of $31,894 in outstanding loans, according to the Education Data Initiative. Unlike the state’s Republican party, Wisconsin borrowers favor the relief and seem happy about the prospect of having a fresh new start in their financial future.