The student loan forgiveness plan will get rid of some student loan debt for about 43 million Americans and eliminate it completely for 20 million people.
University of Tulsa finance professor Eric Olson said if people save that money, it won’t really boost the economy. But if they spend that money, there could be a boom for businesses.
Many people have struggled to pay off their student loans for years.
“They take taxes and all kinds of stuff if you don’t pay them, so it just feels stressful on top of the rest of the stress,” Christian Yelelle said.
Olson said the problem is that tuition has grown faster than most other expenses in recent years.
“Student debt has been a problem, although it’s really grown over the past 10 years,” Olson said. “And tuition fees have undoubtedly increased much faster than inflation over the last 25 years.”
He doesn’t think student loan forgiveness will play much of a role in making inflation worse.
“If they cut my college debt or forgive my college debt, I now have more discretionary income to buy stuff,” Olson said. “And now all of a sudden if I want to buy a house it’s more expensive to buy because interest rates have gone up and I have more discretionary income and it’s probably going to cancel out.
Olson said it’s important to remember that what people do with their money matters, especially when student loan payments resume in January.
“For a lot of people who get the loans forgiven, there will be extra income that they have now, whether it’s inflationary or not, will depend in large part on what they do with the money,” Olson said.
And some people hope to spend that money on big expenses.
“We’re fixing the house,” Yelelle said. “We have some repairs in house, we have repairs to do on our vehicles, and we’re just struggling to make ends meet with the bills that we also have to pay.”
Olson doesn’t want people to worry about the impact that student loan forgiveness could have on the economy because it has never happened before and there are many unknowns.
Comments are closed.