Regional economist speaks on federal student loan forgiveness plan’s economic impact
NEW HANOVER COUNTY, NC (WWAY) —President Biden’s announcement of a student debt relief plan has left many wondering about the impact the cancellation of loans will have on our economy.
Economists from the Penn Wharton Budget Model estimate forgiving federal college student loan debt will cost between $300 billion and $980 billion over the 10-year budget window.
Mouhcine Guettabi, regional economist and associate professor of economics at UNCW, says it is not known at this time if it will help or hurt the economy.
“From a macro-economic standpoint, I still think it’s a really negligible part of the overall economic pie, and I don’t believe that we will see any immediate effects that are directly due to this forgiveness,” said Mouhcine Guettabi, regional economist and associate professor of economics at UNCW.
Guettabi says it is hard to predict how borrowers benefiting from Biden’s student loan forgiveness plan will spend money, they will no longer have to dedicate to loan repayment.
“There has been some concern that maybe the additional money that people will have will potentially put an upward pressure on inflation, because people are just going to go out and spend this money that they’re now receiving, and then of course there is the question which is –well now the government essentially has more debt, right because its accepting the debt that these individuals had, will it have to raise taxes and on whom will they impose those taxes,” said Guettabi.
He says the U.S. has entered the beginning stages of a recession, but it is not known how that paired with inflation and interest rates, will impact the country’s economic standing going forward.
“To me, the student loan forgiveness, as a share of GDP is fairly small. So I don’t think that it tips the balance, in terms of does it accelerate the recession or does it slow down the recession. I think that really the effects are going to be felt by households benefiting from it,” said Guettabi.
The Biden Administration has not yet released information regarding the steps borrowers need to take in order to have their federal student loans forgiven.
