Here’s how many Kentuckians could benefit from $10K in student loan forgiveness from Biden

Hundreds of thousands of Kentuckians could be freed from student loan debt under a forgiveness plan announced by President Joe Biden Wednesday.

Federal student loan borrowers will be forgiven up to $10,000 in such loans - $20,000 for Pell Grant recipients – if they make less than $125,000 annually, or $250,000 for joint-filers.

The president announced the plan just days before the Aug. 31 deadline when the pandemic-induced pause on repayment was set to expire.

As part of the forgiveness plan, the freeze on repayment will continue through the end of the year and there will be some additional relief for those repaying on income-based plans.

In Kentucky, the decision could mean 209,400 residents would have their loans forgiven entirely, a 2021 study from the Kentucky Center for Economic Policy found. Another 406,200 Kentuckians would benefit from a portion of their debt being forgiven.

“This announcement is a good first step that will help hundreds of thousands of Kentuckians whose lives and economic choices suffer under the weight of student debt,” the center said in a Wednesday afternoon release.

The study, which examined the effects of $10,000 and $50,000 in forgiveness, found about 616,000 Kentuckians hold federal student debt, or about 18% of the state’s population older than 18. That debt totals $20.5 billion in principal and interest, or about $33,300 per individual.

Student loan debt is held by a wide swath of state residents.

“Many people don’t realize that Kentuckians with student debt aren’t just young people,” Ashley Spalding, research director for the Ky. Center for Economic Policy, told the Herald-Leader Tuesday. “1/3 are ages 35-49 and 15% are age 50 and over. Black Kentuckians and residents with low incomes are more likely to take out loans and struggle to repay them due to lower wages. Many Kentuckians with student debt left school without earning a degree or credential, likely related to the financial challenges of continuing.”

A separate study from online lending marketplace LendingTree, which looked at the direct loan program, including PLUS loans, found $10,000 in forgiveness would eliminate the student debt for 120,678 Kentucky borrowers, or 33.3%. The state would rank 19th in the nation for portion of borrowers entirely forgiven.

Forgiveness of some student debt is “critical,” the Ky. Center for Economic Policy said in its 2021 analysis, which found the median debt of borrowers was $18,000 and many who hold such debt did not complete their degree.

The center’s executive director, Jason Bailey, echoed the critical nature of forgiveness in a tweet Tuesday, writing “the student debt story is one of misguided assumptions about education, corporate and institutional greed, & broken public policy. Debt should be cancelled, and we should recommit to education as a public good.”

Furthermore, forgiveness could address some racial inequities in the state, the study found, noting Black students were more likely to borrow or get Pell Grants than those of other races, though their median loan amounts weren’t “significantly higher.”

“The shift to the financing of higher education through student debt—and away from higher education as a public good—has particularly harmed people of color (some scholars have referred to it as “predatory inclusion”) and contributed to an increase in the racial wealth gap,” Spalding noted. “Analyses show that a significant amount of student debt cancellation (for instance, at least $50,000) would be a significant step toward addressing these harms.”

The center did not analyze the debt holdings of Kentucky student borrowers with private loans, though Spalding noted at the national level, a vast majority, 90%, of the debt held in student loans is federal.

Calls to forgive federal student borrowing have faced serious opposition, however.

Sen. Minority Leader Mitch McConnell, R-Ky., was among Republicans and others decrying Biden’s plans Tuesday calling it “student loan socialism.”

“President Biden’s student loan socialism is a slap in the face to every family who sacrificed to save for college, every graduate who paid their debt, and every American who chose a certain career path or volunteered to serve in our Armed Forces in order to avoid taking on debt. This policy is astonishingly unfair,” McConnell stated, in part, in a Wednesday release.

In his own statement, U.S. Rep. Andy Barr, R-Ky., said the forgiveness would add $300 billion to the national debt.

“President Biden’s student loan bailout plan is not only unfair to hardworking taxpayers who didn’t go to college, it is a slap in the face to Americans who worked hard and paid off their student loans, or didn’t even take out loans and used their own savings,” he stated.

The move to free some Americans from debt via student loan forgiveness was part of Biden’s 2020 presidential platform.