Experts: Uncertainty remains with new student loan forgiveness plan

The plan is different than the one rejected by the Supreme Court last year. The court ruled that plan was an overstep of the HEROES Act.

Tom Krosnowski and Rose Shannon

Apr 10, 2024, 8:55 PM

Updated 38 days ago

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Experts tell News 12 there is uncertainty with the newest plan to forgive student debt.
The new plan, announced on Monday, would cancel up to $20,000 in interest and completely wipe out debt for those who have been paying for over 20 years.
A 2022 study revealed that the average college graduate in Connecticut has $36,000 in college debt. Fifteen percent of residents have student loans.
The plan is different than the one rejected by the Supreme Court last year. The court ruled that plan was an overstep of the HEROES Act.
The new plan uses a different legal justification.
"Almost certainly, it will be challenged in court. Ultimately, the court will evaluate whether the secretary followed the statutory procedures in the Higher Education Act and then the statutory procedures in the Administrative Procedures Act," says Wayne Unger, an assistant professor of law at Quinnipiac University.
Unger says the plan is a game-changer for the future of college planning.
"This may have a long term effect on evaluating, 'If I repay less over the same period to get forgiveness, then it may make sense to take on that debt,'" says Unger.
John Rosen, a professor economics at the University of New Haven, agrees.
"They can, in theory, go out and spend more money, which in theory, is good for the economy. They can go buy a new house, start a new business, buy a new car, anything," he says.
Rosen warns it's a give and take.
"Interest rates get higher. And it means that those of us who have no debt are paying taxes to pay off the debt that the government has so-called 'forgiven.' Both of those are bad for the economy," says Rosen.
Rosen says the impact of the plan, which mainly benefits older borrowers, remains to be seen.
Relief for those who qualify could begin later this year.


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