COMMENTARY 

By Amani Wells-Onyioha

An expense is something that impacts your wallet. An investment is something that impacts your life. So, which term best describes President Biden’s Student Loan Relief initiative? When you understand the positive impact it will have on everyday Americans — those with student loan debt and those without it — it is easy to see it as an investment that will have far-reaching benefits.

The initiative, which was announced by the White House in August 2022, promises up to $20,000 in debt cancellation for those who received Pell Grants to cover tuition-related expenses. Those who did not receive Pell Grants can have up to $10,000 in student loan debt canceled. In both cases, eligibility requires that you make less than $125,000 per year, or less than $250,000 per year for couples.

Those numbers represent the investment, but what is the impact? The U.S. Department of Education estimates that the initiative has the potential to affect 43 million Americans with outstanding student debt. For nearly half, it will cover the entire amount of their student debt. 

In Georgia, where nearly 1.5 million people are eligible for loan forgiveness, the impact could be huge. The state’s $68 billion in student loan debt averages out to approximately $42,000 per borrower. That average makes Georgia the third highest state in the nation in terms of student debt. Most in Georgia who qualify for loan forgiveness would be eligible for the $20,000 maximum. Regardless of the amount of debt involved, removing it could empower some life-changing moves. 

What would that look like? Consider these scenarios:

• Owning your own home is part of the American dream. Living that dream is difficult when you are carrying student debt. For a married couple, Biden’s initiative has the potential to forgive $40,000 in debt, giving that couple the space to take on a mortgage.
  
• Statistics show that 5 million people have student loans in default, which can result in a wide variety of negative consequences. Debt forgiveness can either do away with those loans, or reduce them to a level where making payments becomes possible. As a result, borrowers avoid being charged collection fees, having their wages garnished, and having their credit scores damaged, among other consequences.
  
• Anyone seeking a loan — whether for a car, a home, or another personal asset — will be assessed by their debt-to-income ratio. The average college grad carrying a high level of debt and earning a modest starting salary does not have a healthy debt-to-income ratio. As a result, they will have a hard time securing credit. When $20,000 in debt is forgiven, it can have a significant positive impact on their debt-to-income ratio.

What about the impact on those who are not carrying student debt? As mentioned, those with less debt have a better chance of securing a mortgage. Reports show that the red-hot housing market is slowing down. Those looking to sell homes should welcome the increased buying potential that comes with loan forgiveness.

For many, a college education was presented as the key to financial freedom. They were told that the more educated they became, the more financially free they would be. Unfortunately, that can’t always be counted on. What can be counted on, however, is that the more educated they become, the more debt they will have.

The average amount of student debt per person nationally currently stands at approximately $30,000. Those in the 25 to 34 age group, which is the age group with the most college debt, make a salary that is just short of $50,000 per year. After taxes and other bills, there is not much left to make student loan payments. Without some form of assistance, many will be on a hamster wheel for the rest of their lives, potentially never making a dent in their debt.

Moving forward, the Biden Administration has proposed that colleges and universities do a better job of justifying the amounts they are charging for higher education. When announcing the Student Loan Relief initiative, the White House said schools, “have an obligation to keep prices reasonable and ensure borrowers get value for their investments, not debt they cannot afford.”

I agree with the Biden Administration that loan forgiveness is not enough. In 2022, an extra $10,000 is equal to a few months’ worth of rent payments. Overall, this relief will only give people a little wiggle room. What they need is an opportunity for an education that does not rob them of their financial freedom.

The movement to offer tuition-free education at state universities, which was once the norm, is making a comeback. I would love to see more states serve their residents by making it a  reality everywhere, guaranteeing the empowerment that comes with education without the despair that comes with overwhelming debt.

Amani Wells-Onyioha is a political expert, civil rights advocate, and thought leader. Working with Sole Strategies as their operations director, she is the engine behind progressive candidates seeking to uplift underrepresented communities. You can reach Wells-Onyioha at [email protected].

For a different view on this topic, read COMMENTARY: Student Loan Forgiveness Is a Policy Mistake