PHOENIX — The Biden White House is forgiving $10,000 in student loans for those making under $125,000 a year and $20,000 for Pell grant recipients. The unprecedented move impacts a lot of Arizonans.
According to the most recent data from the US Department of Education, there are about 885,000 Arizonans with student loans managed directly by the federal government.
Most borrowers, about 300,000, are between the ages of 25 and 34.
The number of borrowers aged 35 to 49 is not far off however at about 290,000.
Currently, those 885,000 borrowers hold $31.6 billion in loans with 35 to 49 holding about $13 billion of that.
It’s unclear exactly how many Arizonans will benefit but taken together the average loan balance in the state is around $35,000.
Based on 2018 data from the Arizona Department of Revenue the number of borrowers that will see forgiveness is close to 90%.
Those critical of the move say that it will contribute to already high inflation.
Local economist Luis Cordova tells ABC 15 that non-payment of at least some student loans is already considered in the inflation equation. “There’s been a pause in student loan repayments since 2020,” Cordova said. “So a lot of this is already embedded in current inflation.”
Cordova did say that it could prolong inflation concerns, noting that while there are short-term benefits, in the long term it will likely lead to increased taxes to make up for the lost revenue.
Another large concern raised by critics is how President Biden has the authority for student loan forgiveness.
In an exclusive interview with ABC15, U.S. Secretary of Education Miguel Cardona said that President Biden is deriving authority from the Heroes Act passed by Congress in the months following the onset of the COVID-19 pandemic.
“We’re using the Heroes Act authority to make sure millions of Americans get support so they can get back on their feet out of the pandemic.” Secretary Cardona said, “We know the pandemic affected everyone, but it affected some more than others. That’s why we focused on targeted loan relief.”
When asked about what the White House would say to those who already paid off their loans or did not go to college because of the expense, Cardona pointed to the PPP loans given to businesses during the pandemic to cover payroll.
He said that even if an individual had paid off their loans, they likely have a family member that would qualify for loan forgiveness. “Lower income folks need a lot of help right now. That’s why we’re targeting toward them,” he said.
Those that qualify for previous loan forgiveness programs such as the public service loan forgiveness program are still eligible for this program as long as they fall within the income threshold.
While loan forgiveness is designed to help pay for college, its unprecedented nature means it is difficult to determine what impact it will have on college tuition.
Both public and private university tuition is one of the fastest rising cost burdens for families.
College is nearly four times as expensive now as it was in 1970 when using 2021 dollars.
Tuition has increased by 15% since 2010.