How Biden’s student loan forgiveness plan will impact South Carolina and its economy

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Published: Aug. 24, 2022 at 8:03 PM EDT
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COLUMBIA, S.C. (WIS) - Nearly 30 percent of South Carolina residents with federal student loans will have their debts canceled entirely under the Biden administration’s new loan forgiveness plan, a recent study shows.

The research was compiled by Student Loan Hero, which is owned by online lending marketplace LendingTree, using Department of Education data.

The plan, which cancels up to $20,000 in debt for Pell Grant recipients and up to $10,000 for individual borrowers making less than $125,000 per year, will impact around 700,000 borrowers statewide, according to Student Loan Hero.

Jacob Channel, senior economist with Student Loan Hero, said that while there is uncertainty about exactly how this could affect the economy, “it’s hard to overstate” the significance of the move.

He said it is the largest forgiveness of federal student loans to date.

The plan has students like University of South Carolina junior Malik Earl breathing a sigh of relief.

“Working in your career you’re going to spend most of your money still paying off college loans, I mean this is a big help, $10,000 isn’t a small amount,” he said. “It definitely relieves some stress in the future. I’m a future med student so there’s much more debt coming along with that.”

Some believe that the administration did not go far enough and should have canceled all student debt.

Others question the fairness of the move.

“I think it’s kind of ridiculous,” Columbia resident Kevin Higgins said. “You take a loan out you’re expected to pay it back so why is the government taking care of it for you? It’s just something you should have to do. You made the choice to go to school and take those loans then you should have to do it yourself. Nobody else should do it for you.”

South Carolina governor Henry McMaster criticized the plan as well.

In a statement, he said in part, “The American dream of prosperity and happiness — achieved through hard work, self-reliance, and playing by the rules — is being threatened by the liberal left’s ‘something-for-nothing’ entitlement culture of handouts, bailouts, and cop outs.”

Borrowers in South Carolina owe a total of nearly $26.8 billion in student loans, the fifth-most in the nation, Student Loan Hero data shows.

The average borrower balance is $36,574, with monthly payments of about $252.

“In the long-term certainly this seems like it’s going to have a very significant impact for hundreds of thousands of people in the state,” Channel said.

Some economists have argued that the cancellation could cause more inflation problems.

With the potential for an influx of money flowing into the economy, they say it could raise demand and put pressure on prices to rise.

Channel, a student loan expert, said he believes this is unlikely.

He said due to the pandemic-era pause in payments that began in March 2020, many are already spending as though they do not have student loans.

“So, the excess money that they would’ve had had say they not gotten student loans or had the pause just now started, they’ve already been spending,” Channel said. “That’s already I think been circulating in the economy. And it’s probably not going to change all that much, especially because we’ve got the extension paused until the start of the year.”

The government will not restart collecting payments on September 1 as previously scheduled. Instead, payments are scheduled to restart at the beginning of next year.

For current students, the Biden administration said they are only eligible if their loans originated before July 1.

Channel said assessing the plan’s impact is also complicated by the fact that it is likely to face legal challenges going forward.

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