FORT MYERS, Fla. — On Wednesday President Biden announced a plan to forgive federal student loans for current and former students, sparking plenty of reaction.
The Biden student loan debt plan has a threshold for students or for current students who are dependents, depending on family income.
For a student with an income of less than $125,000 or a household of less than $250,000 a year, here is what the plan calls for.
$10,000 in federal student loans to get taken off the balance, for someone who received a loan through a pell grant, $20,000 off of the balance.
The pause on paying back student loans would also be extended through the end of this year, but people are asking about the impact on the economy.
"This stands to be a benefit for a lot of individuals," Economics Professor at FGCU, Victor Claar said.
The white house reports about 45 million people have federal student loan debt, "Most student loan borrowers, if they have loans, they’re primarily through the department of education and not through private borrowers."
Claar adds it might not be more money, directly, but would be less money going out, which could get spent elsewhere, "Student loan borrowers will feel like they have more purchasing power today because they do, then it may drive up the demand for goods and services even higher still, at a time where the demand is really strong."
But, there are still many lingering questions about this, many Republicans are coming out against the president’s plan, saying it is targeted at people who, because of college degrees, should have the financial means to pay it off.
The Department of Education also published a document on Wednesday, pointing to the “Heroes Act”, after the September 11th attacks, which gives the department the authority to “Grant relief from student loan requirements during specific periods” and for “specific purposes," so it might not even need to go from the white house and through congress.
If this plan *does* go through, "Be prepared for a bigger federal budget deficit, rapidly increasing national debt clock, and eventually higher taxes for somebody because you can’t get something for nothing," Claar said.
The plan also allows students with undergraduate loans to cap repayment at 5% of their monthly income.
President Biden says that applications for the program will be coming out no later than the end of this year.