NPR: What would happen if student loans were forgiven? (2024)

FAQs

What would happen if all student loans were forgiven? ›

Long term, a reduction in student loan debt could help improve the formation of small businesses and households, as well as spur an increase in homeownership. Blanket student loan debt forgiveness would mostly benefit people who would have likely paid off their loans over the long term.

Student loan debt slows new business growth and limits consumer spending. Broad student loan debt forgiveness may help boost the national economy by making it more affordable for borrowers to participate in it.

If you don't make your student loan payment or you make your payment late, your loan may eventually go into default. If you default on your student loan, that status will be reported to national credit reporting agencies. This reporting may damage your credit rating and future borrowing ability.

Today's announcement brings the total loan forgiveness approved by the Biden-Harris Administration to $153 billion for nearly 4.3 million Americans. Thanks to this Administration's efforts one out of every 10 Federal student loan borrowers has now been approved for some debt relief.

Canceling student loan debt may result in higher inflation rates. Canceling student loan debt may also result in higher interest rates.

The rapid inflation in the cost of college is, in large part, due to rampant government subsidies in higher education. Forgiving student loans only makes that problem worse. The Success Sequence is a formula that outlines areas we can work in that will reduce poverty.

All borrowers on SAVE receive forgiveness after 20 or 25 years, depending on whether they have loans for graduate school. The benefit is based upon the original principal balance of all Federal loans borrowed to attend school, not what a borrower currently owes or the amount of an individual loan.

Despite the Administration's attempts to target low-income borrowers, top earners will still benefit the most from Biden's student loan giveaway. Analysis from the Committee for a Responsible Budget (CFRB) found that America's highest earners will reap nearly two thirds of the giveaway.

Student loan forgiveness in 2022 will not increase your federal taxable income, thanks to the latest American Rescue Plan that makes all student loan forgiveness tax-free.

If student debt disappeared

The average student loan payment is $393 a month. Erasing or lightening the burden of student loans would result in an immediate increase in disposable income for one in six adults. Higher disposable income levels would probably increase graduates' ability to purchase goods and save money.

What happens if you never earn enough to repay student loans? ›

If you stop working, or start to earn below the repayment threshold, your repayments will stop until you earn over the threshold. You'll make a repayment if you go over the weekly or monthly threshold at any point during the year, for example, if you get a bonus or work overtime.

If you work full time for a government or nonprofit organization, you may qualify for forgiveness of the entire remaining balance of your Direct Loans after you've made 120 qualifying payments—i.e., 10 years of payments. To benefit from PSLF, you need to repay your federal student loans under an IDR plan.

A new analysis from the Committee for a Responsible Federal Budget (CRFB) projects that President Biden's student loan cancellation plans could cost taxpayers a combined $870 billion to $1.4 trillion.

How Student Loan Forgiveness Affects a Credit Score. The impact of student loan forgiveness depends greatly on a borrower's unique credit profile. For some, they may see a slight dip, but for most, forgiveness will have a net positive effect.

Alert: A processing pause began on May 1, 2024, for the Public Service Loan Forgiveness (PSLF) Program as we update and streamline our systems for a better user experience. You can continue to submit your PSLF forms during this pause, and we will begin processing them when the update is complete.

Answer and Explanation: If everyone stopped getting in debt and paid off all their credit cards, saved for everything and spent what they earned this will increase the savings excessively which will decrease the circulation of money in the economy.

It can, for example, garnish your wages and withhold your tax refunds if you default on your student loans.

The student debt cancellation and relief measures announced earlier this week by the Biden Administration would cost around $500 billion over a decade and would meaningfully boost inflation.