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 recent investments. According to the Institute for College Access & Success, eight out of ten graduates of New Hampshire public four-year colleges use loans to pay for college since the funding power of Pell Grants has decreased throughout the past few decades. Among these graduates the average amount of debt is slightly above $39,000 making New Hampshire one of the states with the highest amount of average debt load 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 Governor Chris Sununu (R), 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 there would be no federal tax, but residents may have to see what their state officials do in response to the relief in terms of taxation.
Governor Chris Sununu’s response comes as the total outstanding debt among all New Hampshire borrowers is $7.5 billion according to Student Loan Hero by LendingTree. The state is also ranked as having the highest rate of student loan indebtedness by WalletHub and has an average of $34,085 in outstanding loans, according to the Education Data Initiative. Unlike the governor, New Hampshire borrowers favor the relief and seem happy about the prospect of having a positive change in their financial future.