Financial Experts Explain Impact Of Student Loan Forgiveness On Economy

The student loan forgiveness plan will get rid of some student loan debt for about 43 million Americans, and erase it entirely for 20 million people.

University of Tulsa Finance Professor Eric Olson said if people save that money, it really won’t stimulate the economy. But that if they spend that money, it could be a boom to businesses.

Many people have been struggling to pay back their student loans for years.

“They’ll take taxes and all kinds of stuff if you don’t pay it, so it just feels stressful, piled on top of the rest of the stress,” said Christian Yeldelle.

Olson said the problem is tuition is going up faster than most other expenses in recent years.

"Student debt has been a problem though that's really been growing over the past 10 years,” said Olson. "And really student tuition has been going up at a much faster rate than inflation for the past 25 years without a doubt."

He doesn’t think student loan forgiveness will play a major role in making inflation worse.

"If they cut my student debt, or forgive my student debt, I now have more discretionary income to buy stuff,” said Olson. "And so now all of a sudden, if I want to buy a house, the house is more expensive to buy because interest rates are up, and I have more discretionary income, and it's probably going to cancel out."

Olson said it’s important to keep in mind that it all comes down to what people choose to do with their money, especially when student loan payments resume in January.

"For a lot of the people that are getting the loans forgiven there is going to be additional income that they have, now whether it's inflationary or not, is to a large extent going to depend on what they choose to do with the money," said Olson.

And some people hope to put that money toward big expenses.

“Fixing the house up,” said Yeldelle. “We’ve got some repairs needed at the house, we need repairs on our vehicles done, and we’re just struggling to make it by with the bills we have to pay off too.”

Olson doesn’t want people to be worried about the effect student loan forgiveness might have on the economy, because it’s never happened before and there are a lot of unknowns.