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Local economist says effect of President's student loan repayment plan is 'muddy'

Posted at 10:43 PM, Sep 07, 2022
and last updated 2022-09-07 23:43:47-04

CORPUS CHRISTI — “Nothing has been handed out like a stimulus check where people actually receive money,” said Harmeet Singh, an economics lecturer at Texas A&M Kingsville. “This is going to have a trickle-down effect in the years to come.”

KRIS 6 asked Singh, about how President Joe Biden’s Student Loan Forgiveness Plan will affect both borrowers and non-borrowers.

On August 24, Biden announced the details of the plan including up to $10,000 of student debt will be forgiven for people who did not receive the Pell grant. And for those who did, they're looking at up to $20,000 in forgiveness.

“That is very muddy,” Singh said.

Many people claimed the money saved from paying off their loans could still help reduce inflation.

“It’s a help, but from the general economic perspective, that would actually increase inflation if people try to spend more money,” he said.

Biden’s plan doesn’t address where the money the government is losing will be absorbed.

“Federal government runs on taxpayers' money so, in the long run, people might see increases in their taxes,” Singh added.

It might add to the federal debt that’s increased over the last two decades.

Singh said it’s too soon to tell the effect on the country because loan repayments won't kick in again till January 2023.

“There may be a lot of different things that may happen in the economy and people’s personal world, with the stock market,” he said.

Even so, some people said the plan is unfair.

“I worked hard,” Singh said. “I could have delayed. I could have paid the minimum and waited and seen some of it wiped off.”

He understood the thought process but said, looking at the history of student loan debt, the numbers are steep.

“People who went to college for a four-year degree 30 years ago did not have to pay as much or take loans as many dollars as somebody who is going to college now,” he said.

KRIS 6 broke down the average cost of tuition and fees at two local universities and a college for resident undergraduates taking 15 hours a semester.

According to the campuses’ websites and the Texas Higher Education Board, in 2002 Texas A&M Kingsville students paid $3,365 in tuition and fees per semester compared to $9,892 in 2022.

Students at Texas A&M Corpus Christi paid $3,568 in 2002 compared to $9,754 in 2022.

The students at Del Mar College paid $1,138 compared to $2,240 in 2022.

Singh said, back then, public universities were getting more funding from the state but currently, they are passing down those costs to the students.

“You have all of these online tools, the technology, and the student services all the programs when I went to school were very much non-existent,” he said.

He added that whatever side of the debate someone is on, the policy is an unprecedented one.

It's important for future students to weigh their options and plan accordingly.

“Where they go to college and what they study,” Singh said. “Try to do some research about the profession you might have with a certain college degree.”

Because some people’s salaries might not contribute much to the debt they owe.