This year, as the economy has increasingly looked like it’s in trouble and as the midterm elections draw nearer, the Biden administration has zeroed in on a novel policy idea: Forgive some student loan debt.
The idea behind this proposal is fairly simple: Americans are being squeezed financially on many fronts, and because student loans are backed by the federal government, Biden could theoretically wipe out those debts with an executive order.
Forgiving student loan debt would have lots of economic impacts, but one of the most common arguments in the debate over this policy is that it would influence the housing market. Especially among younger Americans, the logic goes, massive student loan debt has made it more difficult to get into the real estate market. Wipe out that debt, and more people get to buy houses.
There’s some truth to this, and economists who spoke to Inman said debt forgiveness could be a huge boon to large numbers of would-be homeowners. However at the same time, there are a lot of other things making the housing market tough right now, and forgiving debt is ultimately unlikely to fundamentally change that reality.
Biden hasn’t unveiled his specific policy yet, but here’s what you need to know as the country waits for the president’s decision:
How big a deal is student loan debt?
The latest figures put the number of Americans who currently have student loans at just north of 43 million. That’s a huge number in absolute terms. Among Americans between the ages of 18 and 29, 34 percent have some student debt.
In total, Americans owe more than $1.7 trillion in student loans, about $1.6 trillion of which are federal loans and thus subject to forgiveness from Biden. The average amount owed is just over $37,000, according to the Education Data Initiative (EDI).
An EDI report further reveals that a majority of student loan “debt is located with those households in the higher income brackets.” Specifically, 60 percent of the debt is…