In addition to borrowing between $3,000 to $4,000 per semester since enrolling at Emory University, Abri Rochte (24B) pays her tuition with her own money each semester.
“It’s always a bit frustrating,” Rochte said. “Every year, I have to take out slightly more loans. I think that’s because the federal system allows you — but also makes you — take more loans each year.”
According to the U.S. Department of Education’s College Scorecard, the median post-graduation debt for Emory graduates is $16,556, and approximately 25% of Emory students receive federal loans.
As of this semester, Rochte has taken out close to $16,000 in federal loans. But under U.S. President Joe Biden’s loan forgiveness plan, Rochte qualifies for up to $20,000 in loan forgiveness.
“I wish they made it more obvious that the cutoff was loans from June 30, but I’m thankful that there’s loan forgiveness at all,” Rochte said. “I think it’ll cut my total amount that I owe upon graduation in half.”
Biden announced on Aug. 24 that the federal government would cancel $10,000 of student debt for low- to middle-income borrowers. According to an Aug. 24 statement released by the White House, Biden will implement a three-part plan to provide more “breathing room” to the United State’s working families.
Since 1980, the cost of attending both private and public four-year universities has nearly tripled, with almost a third of borrowers having debt but no degree due to their inability to keep up with cost of attendance.
The burden falls disproportionately on Black borrowers. A typical Black borrower who started college in 1995 still owes 95% of their cumulative borrowing total.
Biden’s three-part plan will provide targeted debt relief, with up to $20,000 in debt cancellations to Pell Grant recipients — students who have demonstrated financial need and have not earned their bachelor’s degree — and $10,000 to non-Pell recipients. High-income individuals in the top five percent of incomes will not benefit from the loan relief.
The plan will also “[hold] schools accountable when they hike up prices” and cut monthly payments in half for undergraduate loans, according to the White House statement.
Biden’s plan comes seven months after Emory announced in January that need-based loans would be eliminated and replaced with institutional grants and scholarships for the 2022-23 academic year. This expanded the Emory Advantage program now offers institutional grants instead of loans and gives students the opportunity to graduate debt free.
Assistant Vice President of Emory Communications and Marketing Laura Diamond wrote in an email to the Wheel that the program is expected to double the number of students whose need-based loans are replaced by grants at Emory, bringing the number to 3,055 undergraduate students.
“The expanded Emory Advantage program is just one aspect of Emory’s ongoing effort to support students,” Diamond wrote. “In all, Emory provides more than $350 million each year for institutional grant and scholarship aid for undergraduate, graduate and professional students.”
Rochte was initially excited to hear about Emory’s new changes, and she anticipated that the University would substitute something else to replace loans. However, she currently owes close to $1,000 more this year than she previously has, with no observable changes to her financial aid.
“I still had to take a lot of loans, so I don’t even know what that was about,” Rochte said. “I would love to get a follow-up. … I don’t know anyone who has actually had their financial aid changed from that.”
Rochte added that she should qualify for Emory’s supposed loan replacement grant, but she still has thousands to cover on her own. She said it’s unclear if the University did not cover enough, or if they did not give her anything at all.
Keeping his campaign promise
Associate Professor of Political Science Andra Gillespie said that Biden aims to keep his initial campaign promise to forgive student loan debt from public colleges and universities.
“He didn’t want to discourage some voters from showing up because they didn’t feel that he was acting on the interest he had run on,” Gillespie said.
According to Gillespie, Biden is attempting to energize Democratic voters who felt like the Biden administration and the Democrats in Congress weren’t delivering on the promises that they ran on in 2020. She said that the plan is targeted toward young voters, who historically have much lower turnout than older generations.
“This is something that can be used on the doors and on the phones with people to excite them about why you should vote Democratic, then he wanted that,” Gillespie said.
Associate Professor of Political Science Zachary Peskowitz added that whenever a policy is easy to understand, highly important and offers benefits to particular groups of people, there is a good chance that it will increase votes for the politicians who take credit for that policy.
“It’s plausible that turnout will increase particularly among beneficiaries, and that it will help Democratic candidates in the midterms,” Peskowitz said.
Professor of Economics Caroline Fohlin said that there are likely many Emory students who were student loan borrowers and will be benefiting from the plan. From that standpoint, some individuals will get an additional boost in income through the loan forgiveness plan.
The income cap is also comparatively high, Fohlin noted. Those who earn up to $125,000 — which is about twice the median income in the United States — can qualify for loan forgiveness. The average starting salary for graduates with a bachelor’s degree is $55,260, a number that is also well below the income cap.
Fohlin added that it is difficult to anticipate the wider macroeconomic effects of the plan.
The pause on student loan payments during the pandemic, which started in 2020, is still leaving visible impressions on the economy, Fohlin said. People were getting temporary short-term cash flow, which likely contributed slightly to inflation in terms of greater spending power, Fohlin added.
“There’s so many other factors going on in the economy right now, because COVID is still causing lockdowns in China and other kinds of supply chain disruptions,” Fohlin said. “And we’re seeing a big increase in interest rates from the [federal government].”
There is reason to believe Biden’s loan forgiveness plan will cause more inflation, Fohlin noted.
“But there’s so many dynamic factors in play, so it’s not like you’ll be able to pin down the extent to which this policy will increase inflation,” Fohlin said.