How Biden’s Student Loan Cancellation Would Impact Tennessee Residents
One in 8 Tennessees waiting to hear if President Joe Biden cancel a portion of federal student loan debt.
The amount of debt the government would cancel per borrower is still up in the air – in May, the Washington Post reported that the The White House planned to forgive $10,000 per borrower.
Knox News spoke to higher education experts to find out who in Tennessee would benefit from a $10,000 loan forgiveness plan.
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How much student loan debt does Tennessee have?
According to federal data for December, residents of Tennessee have student loan debt of $31.4 billion.
That’s about $2 billion more than the state average of $29 billion, according to data compiled by the Education Data Initiative.
In the United States, there is an outstanding federal student loan balance of $1.606 trillion.
More than 43.4 million people have federal student loan debt, making it the second largest category of consumer debt after mortgages, according to the U.S. Department of Education’s Office of Federal Student Aid.
A significant portion of this student debt is made up of loans taken out for graduate and vocational degrees for professions such as doctors and lawyers.
“It’s a little bit different from undergraduate student debt, because they’re people who probably have a bit more income, and they’ve already experienced college compared to someone who trying it for the first time,” said Robert Kelchen, a superior. Professor of Education and Head of Educational Leadership and Policy Studies at the University of Tennessee at Knoxville.
Who Has Student Debt in Tennessee?
There are more than 862,000 Federal student loan borrowers who live in Tennessee. More than half of them are under 35 years old. In Tennessee, fewer people are likely to have student debt, but those with a higher outstanding balance, according to the Education Data Initiative.
The state’s average debt per borrower is $36,418, just below the national average.
About 32% of borrowers in Tennessee owe less than $10,000, according to federal data. This means that more than 271,000 people would see their student loans completely canceled if the floating plan were adopted.
“For borrowers who don’t owe that much money, say they went to community college or they’re almost done paying (on their loan), $10,000 wipes their slate clean,” Kelchen said.
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Another 20% owe between $10,000 and $20,000 in student debt, and the rest owe more than $20,000.
Lifting the burden of that debt could help borrowers feel empowered to move on with their lives, Kelchen said.
“The impact of student debt is that it’s money that students can’t spend on anything else,” Kelchen said. “It can mean people can choose to put off buying a car or a house. They can put off things like getting married or having kids because it’s so expensive.”
What are the ways to reduce the burden of student debt?
Kelchen said one way to reduce student debt burdens is to make college more affordable by lowering tuition or offering more scholarships and grants.
“Tennessee has done a lot over the past five years to significantly lower the net price of the community college sector,” Gentile said. The Tennessee Promise Scholarship offers two years of free tuition at one of Tennessee’s community colleges or colleges of applied technology.
A study by Gentile and two other higher education experts found that fewer first-time full-time students took out college loans after the Tennessee Promise program launched in 2015. For those who continued to take loans, students took less money than before.
This year, the Tennessee Commission on Higher Education voted not to raise tuition fees in all its colleges and universities.
According to the Tennessee Higher Education Fact Book, $14,509 is the average annual “net” cost of a four-year public college in Tennessee. This “net” cost includes tuition, fees, books, supplies, rent, food, and other living expenses, and then applies to average federal financial aid. At community colleges, the average annual award is $6,063.
Schools could also find ways to cut costs and pass those savings on to students.
“If you spend less on students, you can charge less from them,” Kelchen said. “But this route means things like larger classes and less expense on facilities.”