Biden's student loan forgiveness plan raises inflation concerns
DAVIS (CBS13) – There has been mixed reaction to the president's announcement on student loan forgiveness.
Some Northern Californians are applauding the Biden Administration's move, while others worry there will be unintended consequences.
Exams and essays are not the only things keeping Rose Johnson up at night.
"I know that I need to make money right out of college so that I can pay off my debts," said Johnson, a UC Davis senior.
Johnson finds some relief knowing her student loan debts could be wiped clean. But even those who never took out loans welcome debt forgiveness.
"Going to school is one of the best things we can do for the economy, ultimately," said Willie Klassen. "It gets people educated, more productive."
Though some think the income to qualify should be much lower than $125,000 per person.
Others say it seems unfair, because they skimped and saved to pay off their loans.
"It's disappointing who could've done that – [they] didn't do it and they're now in debt," said Philip Bachand, who helped his wife send their four children to college. "Then, they're getting this forgiveness."
Millions of borrowers are asking when can they apply for forgiveness. The U.S. Department of Education is working on what the White House refers to as "a simple application process for borrowers to claim relief." Applications are expected to be available before December 31, which is when the pause on federal student loan repayments ends.
But could this forgiveness spell trouble for the U.S. economy?
"Anybody who's getting a $10,000 savings some place will likely spend that on something else," said Dr. Sanjay Varshney, a professor of finance at Sacramento State.
Economists warn the move could further hike inflation. Wherever you stand on debt forgiveness, critics and supporters agree an important conversation is being sidelined.
"The tuition cost has tripled since 1990," Dr. Varshney said. "On average, private school has gone up by more than nine or 10 percent per year when inflation was only two percent."
Johnson says costs have gotten a lot worse.
"I think everyone has the right to get educated," she said.