Ohioans hold more than $60 billion in student loan debt. That’s part of over a trillion owed nationwide.
President Joe Biden has promised to relieve some of this debt. After the courts rejected a more expansive student loan forgiveness plan, the Biden administration has pushed forward with smaller, targeted debt relief.
More than 120,000 Ohioans with student loans have seen some debt cancellation, amounting to $5.8 billion so far, according to the White House.
“We're talking about lifting a financial burden for people in need, in a way that can ultimately result in a big boost to the economy of their community and to their state,” said U.S. Secretary of Education Miguel Cardona, at a press conference about student loan forgiveness in February.
Biden’s Plan B
Back in 2022, Biden announced a big plan to forgive $10,000 in debt for most borrowers. But those efforts were thwarted last summer, when the Supreme Court struck down the wide-reaching plan as an overreach in presidential authority.
Instead, the administration announced last month that it will take a more piecemeal approach, targeting debt relief toward long-time borrowers and those who have accrued considerable interest. People who have owed loans for more than 20 years and people who owe more loans than they originally borrowed will get portions or all of their remaining debt forgiven.
Michael Jones, an assistant professor of economics at the University of Cincinnati, said the plan will also work to improve enrollment in pre-existing loan forgiveness programs, like the Public Service Loan Forgiveness program, which offers debt relief for government and nonprofit employees who make 120 qualifying payments.
“Many of those loan programs weren't operating as they were intended to. In some cases, over 90% of applicants had applied, and they were denied the forgiveness for those programs,” Jones said.
The Biden administration has approved $2.6 billion in debt cancellation for more than 30,000 public service workers in Ohio.
Pros and cons
The forgiveness plan could have a wider impact on Ohio’s economy, Jones said.
Many who advocate for student loan forgiveness argue it can help drive up consumer spending. Jones said student loan forgiveness could free up cash for people and lead to more disposable income to afford basic necessities, purchase homes or even start their own businesses.
But Jones said there could be potentially harmful impacts to the economy as well, arguing future students might change their behavior if they expect their loans to be forgiven.
“If you no longer have to bear the full cost of the loan that you were planning to take out, the
The forgiveness plan could also have a wider impact on the cost of tuition, according to Jones. He said universities could choose to charge more, if students are more willing to take on debt.
“Really when we're talking about loan forgiveness, we're transferring the cost from the individual to the taxpayer at large,” he said.
College affordability
The cost of higher education across Ohio has already seen significant increases. Average in-state tuition for first-year students at the state’s four-year public institutions has doubled in the last two decades and even increased by 3% in the last fiscal year, according to data from the Ohio Department of Higher Education.
But, Jones said the price of post-secondary education has not seen the same sharp inflationary increases as other costs, like real estate or rent. He argues that, while the sticker price has risen, so has the amount of scholarships offered to students.
As colleges compete to combat low enrollment, they’re finding ways to become more affordable.
“A lot of universities are actually competing to get students by increasing the scholarships. And so as a result, the amount that students are paying out of pocket or taking on in terms of loan is not actually increasing at the rate of inflation,” Jones said.
