Biden loan forgiveness plan could erase $3 billion in Arkansas student debt
Billions of dollars in student loan debt owed by Arkansans could be forgiven as a result of the Biden Administration’s new student loan forgiveness plan.
The plan, announced Wednesday, aims to cancel $10,000 of student debt for most people making less than $125,000 a year. It would also forgive $20,000 of debt for recipients of Pell Grants, which are typically for undergraduate college students with “exceptional financial need.”
Tony Williams is director of the Arkansas Student Loan Authority, a division of the Arkansas Development Finance Authority and the state Department of Commerce. Speaking with KUAR News, he said a lot of Arkansans stand to benefit from the debt relief plan.
“What that means big-picture in Arkansas is probably a forgiveness of $2.5 billion to $3 billion, most likely affecting probably at least 350,000 student loan borrowers in Arkansas. And so it’s very significant, it’s an incredible gift to those student loan borrowers,” Williams said.
Biden’s plan would cap monthly payments for undergraduate student loans at 5% of a borrower’s discretionary income and expands eligibility for the Public Service Loan Forgiveness program. According to the White House, the plan also aims to reduce the cost of college and hold schools accountable for rising tuition prices.
According to the Arkansas Student Loan Authority, students in the state borrow an average of about $600 million each year. Aside from the positive impacts, Williams says Biden’s plan could potentially lead to more students choosing to take out loans to fund their education.
“I think this action by the president may plant a seed in people’s minds that borrowing is okay, there’s always a chance of forgiveness, and it’s going to be easier to repay your student loans. And so I’m afraid that may encourage more student loan borrowing going forward,” he said.
Williams says he would like to see more action from the federal government to address the high interest rates of student loans. While Arkansas will see an immediate drop in overall student debt, he says that total could rise in the coming years because of friendlier repayment terms outlined in the plan.
“Today we’re at $13 [billion] to $14 billion in student loan debt in the state. That will immediately drop if forgiveness actually happens, and then we’ll probably return to those levels within the next five years,” Williams said. “I would say this is a bit of a Band-Aid, not a long-term solution for making higher education more affordable.”
He urged Arkansans with student debt to remain patient for more guidance from the federal government, saying likely legal challenges to the plan could delay its implementation.
“I think the next few weeks and months involve some chaos and confusion as we try to work through this. We want to be able to give students good guidance, and right now it’s very difficult to do. People need to be very patient and wait for the details to be released,” Williams said.
In a statement Wednesday, Gov. Asa Hutchinson called Biden’s student loan forgiveness plan a “misuse of executive authority,” suggesting more should be done to permanently lower interest rates and address the cost of higher education.
“Shifting the burden from those who willingly took out a loan to all taxpayers is inconsistent with the American ideal of personal responsibility and will further discourage those who took a different path, including work or lower-cost schools,” the statement said.
Republican Sen. Tom Cotton of Arkansas also criticized the plan Wednesday, calling it a “bailout” funded by taxpayers who have paid off their debts or never attended college. Cotton said he plans to introduce his own bill to “hold these colleges accountable for debt, lower tuition, support non-college career paths, and save the taxpayers billions.”
Arkansas Attorney General Leslie Rutledge told Fox News on Thursday she hopes to take legal action against President Biden in an attempt to stop the plan from taking effect.