Borrowers who saw student debt erased by Biden-Harris admin say ‘forgiveness is nice but not life-changing’

So far, about 943,000 people have had their loans eliminated through President Joe Biden's student loan cancellation plan, with their balances standing at an average of $72,000. Another two million people had their student loans canceled by programs designed for the disabled or those with chronically low incomes.

But the plan continues to sail in troubled waters with a federal appeals court blocking the remaining portion of the plan under the Saving on a Valuable Education (SAVE) program that was supposed to lower payments for borrowers. The July ruling from the 8th Circuit Court of Appeal came just as the Biden administration was announcing yet another student debt cancellation plan. The court will allow seven Republican states to block portions that had not previously been blocked by the courts, In June, a St. Louis court prevented the administration from providing more student loan cancellations under its SAVE program.

However, the Biden-Harris administration still plans to dispense another $20 billion in taxpayer funds to assist another 1.3 million people who say they borrowed the money because their university or college assured them that immediate post-graduation employment would make paying it back an easy matter. The plan was just part of a Biden administration that spent trillions of dollars on questionable Covid relief, faux infrastructure bills and the Inflation Reduction Plan, parts of which will never be realized.

But even for those who got their money from the government, it hasn’t resulted in a life free from financial worries, the WSJ notes.

In interviews, the borrowers who have had their loans wiped away say the act has given them more freedom or helped them sleep easier at night. But it hasn’t been a panacea for all of their financial stress.

Students who defaulted on their loans are awash in long-term credit problems and don’t experience a financial boon from cancellation since they had long ceased to pay back the money borrowed.

“For the typical borrower, the forgiveness is nice but not life-changing,” Constantine Yannelis, an associate professor of finance at the University of Chicago, told the WSJ.

The WSJ notes how Annetta Walker borrowed $36,000 to go to college for a graphic design degree. The amount she borrowed ended up doubling when interest payments were tabulated. In May 2023, her balance of payments, some $82,000, was canceled.

However, despite the debt forgiveness, Walker has been unable to qualify for a mortgage and has endured heartache in the job market.

“I hope one day I’ll be able to buy a home and stop living this transient lifestyle,” Walker told the WSJ. “And I’m hopeful for some sort of generational wealth for my kids.”

Economists say it is difficult to assess whether the cancellation plan is actually bringing long-term economic benefits to anyone and not just being another source of inflationary and reckless spending from the Biden-Harris administration.

it is hard to draw broad conclusions just yet, because borrowers have a range of spending habits and earnings. In addition, the bulk of those who have had their loans forgiven are still new to life without having to make the payments.

A July study conducted by Yannelis and others revealed that many people who have one debt canceled quickly find other ways to overspend their income. Moreover, the researchers found the debt forgiveness did not result in better credit scores – and without that, it is difficult to find any form of financial freedom.