HIGHLAND HEIGHTS, Ky. — Much debate has risen following President Joe Biden’s announcement of plans to cancel student loan debt for borrowers who meet certain criteria. The plan outlines forgiving $10,000 in student loans for borrowers in the U.S. making less than $125,000 per year, or $20,000 for Pell Grant recipients, fulfilling a long-delayed campaign promise pushed for by Democrats and advocates for more than a year.

In addition to the canceled loans, Biden extended the student loan repayment pause through the end of 2022, adding that it’d be the final extension he makes.

People in debt, those who’ve paid off their debt and those who’ve never had it are asking how this affects them—and more broadly, how it affects the U.S. economy. Janet Harrah, an economist at Northern Kentucky University, gave some insight on what the impact could be.

“I don’t think anyone can give you an accurate prediction on what, if any, impact this will have on inflation,” Harrah said.

One reason for that, she said, is that many people haven’t been making student loan debt payments for the past two and a half years during the moratorium on debt repayment, which was first instituted by President Donald Trump in 2020. “They’ve already built in their changes in spending,” Harrah said.

People who haven’t been making payments resuming payments when the moratorium ends could actually have a deflationary effect on the economy, Harrah said.

Many people have also continued to make payments through the moratorium.

“They might just continue to make the payments I have been making so I can discharge my loan faster. And in that case, it’s not going to affect inflation at all until it’s down the road,” Harrah said.

The average amount of student loan debt for individuals in America, of which there are about 43 million, is about $37,000, Harrah said. She said most people who have debt are currently earning less than $75,000 a year.

She said the largest debt amounts fall into two categories: people who earned graduate degrees and medical professionals. Most doctors would not be eligible for loan forgiveness under the framework outlined, even though they have some of the highest loan debt.

“When we instituted social security back in the 1930s, I’m sure there were people grumbling, ‘Well I’m 85 years old, and nobody’s been paying me to be retired,’ when they instituted it. But everyone since then has been receiving social security that was eligible,” Harrah said. “This is a onetime program. You’re helping a group of individuals one time.”

She said many of the public assertions of “unfairness” aren’t solely about the onetime forgiveness.

“I think the part that people find unfair is they understand that for students that are taking on debt now [and in the future], there’s no certainty that anybody’s going to help them,” she explained.

Barnabas Olatoian just started his last semester of college at NKU, which he hopes is followed by landing a job in his field of study: cyber security. He previously spent a few years at the University of Kentucky before transferring to NKU in 2020, right at the start of the pandemic.

“In that process, I took out a student loan, and so now here, I learned from that not to take any loans,” Olatoian said.

That loan was for $10,000, the exact amount Biden announced would be forgiven for people who earn less than $125,000 a year.

Olatoian wasn’t sure he’d end up qualifying, but he was hopeful.

“Honestly, I would jump for joy. If I could do backflips, I would. So I would love that. If that were to apply to me, thank you President Biden. Let’s do it. Let’s get it,” he said.

Even if he doesn’t qualify, Olatoian’s debt is much less than the average debt of his fellow Kentuckians. Roughly 616,000 Kentuckians hold some amount of student loan debt, with the average being $33,300.

Over 209,400 borrowers owe $10,000 or less, according to Kentucky Center for Economic Policy analysis. Those people would have their debt fully forgiven under Biden’s plan.

Olatoian learned early on a lesson that usually comes after college for many people.

“My sister, she took out a tremendous amount of student loans. I think over $50,000 to finish her time where she was at [the University of] Kentucky. And that just reinforced into me, like hey, I don’t want that, especially that amount of debt,” he said. “Just having that much amount of debt on you is just like, it weighs on you mentally. And mental health is a big thing. That’s a big burden to have on you.”

Paying as he went instead of taking out debt was the better way to go for Olatoian. “If I can’t afford it right now, let me plan out before I can afford it before I commit to something that ten years from now I can’t pay back,” he added.

Following Biden’s announcement, many have debated the merits of student loan forgiveness.

Those in opposition argue it’s unfair to purportedly raise taxes for people who have already paid off their debt or decided not to take on any debt. NKU student William Brbovic’s military service is allowing him to go to college without taking out student loans.

“I mean, even though most of my school is paid for, I think it’s a great thing that they’re reliving some of their debt, especially since the price and everything is rising so much,” Brbovic said.

Supporters of student loan debt forgiveness argue the move will serve its intended purpose of providing needed relief to people who will, in turn, help stimulate the economy.

“Instead of the individual that took out the student loan paying that amount, now all taxpayers collectively are going to pay that amount. But if we think about it, we do this all the time. We subsidize farmers, we subsidize health care workers, we subsidize all kinds of groups through taxes,” Harrah said. “It is a lot of money we’re talking about. And it means a lot to the individual that’s having their loans discharged. But let’s be realistic. In the grand scheme of the budget, you’re not talking about 10-15% of the federal budget.

“If you compare this to the trillions of dollars we spent on the last three stimulus payments, this is not a huge federal program.”

Harrah said she thinks the forgiveness will fuel some short-term inflation.

“We are not solving the underlying problem. The problem is the cost and affordability of higher education,” she said. “You have students in school right now. They’re taking out loans right now that have a higher interest rate, sometimes double the interest rates, of the loans you are discharging from students that were in school 20 years ago.”

For decades, Harrah said, the federal government has been dis-investing in higher education systems across the country, shifting the cost burden from taxpayers at large to families and students individually. That cost has become such that many people can’t afford to make the debt payments, she said.

That’s another lesson Olatoian has learned and wants to pass on to others.

“I’m more on the side of: let’s help if we can. But let’s also be smart about not preaching that college is for everyone. When it comes to college, if you’re going to be taking on massive loans, make sure you’re in it for something that’s going to be a good payout in the end,” he said.

Harrah said this process will take its time, and there’s no guarantee loan forgiveness will pass through the judicial system, as she said she’s confident there will be legal action taken against the federal government by those arguing the president doesn’t have the legal authority.

The White House also announced another key part of their loan relief effort that could aid future borrowers: reforms to the income-driven repayment plan system that would mean people making under a certain amount of money per year would end up paying less per month toward their undergraduate loans.

The changes would cap the monthly payment amount at 5% of a borrower’s income, plus cover any unpaid monthly interest so the balance doesn’t increase. Anyone who borrowed less than $12,000 will see the rest of their loans forgiven after ten years, as long as they make payments toward the plan.

The cost of the $10K forgiveness plan would reach close to $330 billion over ten years, according to a model from the University of Pennsylvania’s Wharton business school, not counting the additional money for Pell Grant recipients.