The housing market is characterized by soaring mortgage rates and a scarcity of available properties, creating a challenging environment for those freed from the burden of student debt.
According to The Post Millennial, approximately 943,000 individuals have had their student loans wiped clean under President Joe Biden's student loan forgiveness scheme, with the average balance standing at $72,000. An additional two million people have seen their student loans erased through initiatives aimed at assisting the disabled or those with persistently low incomes.
However, the program has encountered significant obstacles. A federal appeals court has halted the remaining portion of the plan under the Saving on a Valuable Education (SAVE) program, which was intended to reduce payments for borrowers. This ruling from the 8th Circuit Court of Appeal in July coincided with the Biden administration's announcement of another student debt cancellation plan. The court has permitted seven Republican states to obstruct portions that had not previously been blocked by the courts. Earlier, in June, a St. Louis court had prevented the administration from offering more student loan cancellations under its SAVE program.
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Despite these setbacks, the Biden-Harris administration remains committed to allocating an additional $20 billion in taxpayer funds to aid another 1.3 million people. These individuals claim they borrowed the money because their university or college assured them that immediate post-graduation employment would make repayment a simple task. This plan is just one component of a Biden administration that has spent trillions on controversial Covid relief, dubious infrastructure bills, and the Inflation Reduction Plan, some elements of which will never come to fruition.
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However, as the Wall Street Journal points out, even those who have received government funds are not living a worry-free financial life.
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Borrowers who have had their loans erased report that the act has provided them with greater freedom and improved their sleep quality. However, it has not been a cure-all for their financial stress. Those who defaulted on their loans are grappling with long-term credit issues and do not reap a financial windfall from cancellation since they had long stopped repaying the borrowed money.
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Constantine Yannelis, an associate professor of finance at the University of Chicago, told the Wall Street Journal, “For the typical borrower, the forgiveness is nice but not life-changing.”
Annetta Walker, who borrowed $36,000 for a graphic design degree, saw her debt double when interest payments were factored in. In May 2023, her balance of payments, totaling $82,000, was canceled. Despite this, Walker has been unable to qualify for a mortgage and has faced difficulties in the job market.
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“I hope one day I’ll be able to buy a home and stop living this transient lifestyle,” Walker told the Wall Street Journal. “And I’m hopeful for some sort of generational wealth for my kids.”
Economists are finding it challenging to determine whether the cancellation plan is genuinely providing long-term economic benefits or merely contributing to inflationary and reckless spending by the Biden-Harris administration.
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A study conducted in July by Yannelis and his colleagues found that many people who have one debt canceled quickly find other ways to overspend their income. Furthermore, the researchers discovered that debt forgiveness did not result in better credit scores, making it difficult to achieve any form of financial freedom. This raises questions about the effectiveness of the student loan cancellation plan and its potential long-term impacts on the economy.
