WICHITA, Kan. (KSNW) – How will President Joe Biden’s plan to forgive some student loans impact your wallet? Could it lead to increased inflation? Two local economists break down their thoughts.
Jeremy Hill, the director of the Center of Economic Development and Business Research at Wichita State University, said that right now, the average Kansan pays about $250 a month to their federal student loan. With Biden’s announcement that payment could be about $80 less.
“Some of the $80 is automatically going to go back into this inflation expectation because of the policy, so they’re not even — you’re going to knock off several dollars each month — because you are dealing with more inflation,” said Hill.
Hill said in Kansas, data shows those who borrow money for student loans borrow about $26,000. He said it will still take most Kansans years to pay back their loans.
“Education is the primary factor of growing an economy — but most of these people already did their education it is not really an encouragement — this prevents that discouragement of other people getting education, however, the policy itself gets a little wonky about how effective it will be,” said Hill.
With an estimate of more than $330 billion forgiven over the 10 years for this plan. Dr. Ted Bolema, the executive director of the Institute for the Study of Economic Growth, said people should be concerned about inflation.
“That will have the same impact on the government deficient and presumably on inflation on more money in the economy chasing the same amount of goods and services as before,” said Bolema.
Hill said overall, default and delinquencies on student loans were only about 5% last year. He said the majority of students have been paying their student loans.