BUSINESS + ECONOMY

How will forgiving student loan debt impact the economy?

Aug 24, 2022, 7:30 PM | Updated: Sep 23, 2022, 12:55 pm

On Wednesday, President Biden announced forgiveness of some student loan debt.
AP Photo/Evan Vucci,...

On Wednesday, President Biden announced forgiveness of some student loan debt. AP Photo/Evan Vucci,

SALT LAKE CITY – The Biden Administration’s announcement on forgiving $10,000 in student loan debt could have impacts on people without student loans.

Mainly, it could change the U.S. economy. 

“Essentially injecting another 300 billion dollars into the economy, will drive higher demand and could drive higher prices as well,” said Zions Bank Senior Economist Robert Spendlove. 

But this will also have a big individual impact for many Americans. 

Borrowers who received a federal Pell grant will be eligible for $20,000 in cancelled debt. 

“Even on the margins, a lot of people are really struggling right now. A lot of people are struggling to make ends meet. A lot of people are, you know, worried about kind of their debt level,” Spendlove said. “And so, to those individuals, and to that extent, I think it’ll be very helpful.”

But Spendlove also says the impact will be limited because of the $10,000 cap for most borrowers. 

“Those that have student loan debt, have more than 10 thousand dollars in student loan debt,” Spendlove said. “And when we kind of look at the aggregate impact, it’s about 20% of the total amount that students have borrowed.”

The forgiveness could also impact the future of higher education, according to Senior Research Fellow for the Center for Growth and Opportunity at USU, Rick Evans. 

“I think students are going to borrow more. There’s going to be higher demand on higher education. And more doing higher education with debt, which is not always a good thing,” Evans said.

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How will forgiving student loan debt impact the economy?