The White House just announced it. According to the Biden administration, student debt is “a huge burden on the American middle class.” More than 45 million Americans have a total debt of $1.6 trillion. This amount was roughly converted in euros.
‘The decision is unfair’
The long-term plan leads to mixed reactions. On the other hand, people are disappointed not to give away more money in these tough financial times. But on the other hand, Americans who have done everything in their power to pay off their debts find the decision unfair.
However, Biden is still implementing his decision, which is in line with his campaign promise to make major reforms to the US student loan system. He calls it “the breathing room for middle-class workers and families”.
The US government had already taken a break to pay off student debt during the Corona crisis to confront the Americans. Biden just announced that this gap will now be extended through the end of the year.
Furthermore, Americans only have to repay a small portion of their monthly income, and even poorer Americans don’t have to repay anything at all. If a debt of up to $12,000 remains after ten years of repayment, it will be fully forgiven.
Spend more because of this
Thus some Americans are forgiven part of their debt. The government believes the move will reduce hundreds of billions of dollars in outstanding debt and boost consumer spending. For example, many Americans are now putting off buying a home because they are burdened with debt.
The Biden administration does not believe that cutting some student debt will boost inflation, GOP opponents argue. Consumer prices may drop somewhat. These indicate that payments will resume at the same time that part of the debt is cancelled. As a result, there is suddenly not a lot of extra money in the economy, but less affluent Americans especially benefit.
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