LITTLE ROCK, Ark. — President Joe Biden made his big debt relief announcement on Wednesday afternoon, and the big presidential promise has had millions with student loans starting to re-figure their finances.
The announcement has also fired up a long-simmering debate— what does this mean for millions of borrowers including hundreds of thousands in Arkansas?
"Here's what my administration is going to do. Provide more breathing room for people so they are less burdened by student debt," President Joe Biden said.
According to the White House, more than 45 million borrowers could be seeing some financial relief.
The president's plan forgives $20,000 for people who received pell grants and $10,000 for other borrowers.
The relief is capped for people who make less than $125,000 a year.
"This has been expected for some time," Arkansas economist Michael Pakko said.
According to Pakko, close to 400,000 students in Arkansas have student loan debt, which amounts to more than $13 billion in our state.
"13% of Arkansas population will be directly benefiting from the student loan repayment plan," Pakko explained.
While this announcement will help students in debt in the long term, Pakko doesn't believe the loan forgiveness plan will have much of an impact on the economy.
"This isn't actually going to put additional spending money into the pockets of those borrowers," Pakko described.
Pakko also added that the forgiven student loan debt won't just disappear.
He said when the federal government provides debt relief, there are three ways it can be financed. Those include higher taxes, cutbacks on other government programs, or an addition to the federal debt that already exists.
Meanwhile, Republicans have criticized president's plan, and some have reffered to it as a "handout."
"Just think about how unfair this is for all of the Americans who are harmed by this who are now on the hook for hundreds of billions of dollars of other people's loans," said Senator Tom Cotton.
The goal of the Biden administration's plan is to target people with the highest economic need.
According to the White House, historically, black borrowers have been twice as likely to have received pell grants compared to other borrowers.
Also, statistically women have borrowed more than men.
"Those who receive Pell Grants are those who were economically disadvantaged, to begin with as they are taking out loans," Pakko added.
The Biden administration has also announced they will extend the moratorium on federal student loan repayments for the final time, and payments are set to resume in January.
President Biden also eplained that the Department of Education will release more guidance in the coming weeks for federal borrowers to apply for the student debt relief plan.
For more information on the student loan relief plan, please click here.