PORTLAND, Ore. (KOIN) – President Joe Biden’s student loan forgiveness will cancel about $4 billion in debt for Oregonians, according to an estimate from the Oregon Office of Economic Analysis.
On Wednesday, Biden announced his administration will forgive $10,000 in federal student loans for everyone earning less than $125,00 per year and $20,000 for anyone who received a Pell Grant. This also applies to households earning less than $250,000 combined.
In Oregon, student loan debt has increased in the last decade, but at a slower pace or at a rate roughly equal to economic growth, state economist Josh Lehner wrote.
“Measured as a share of income, student loan debt in Oregon has been steady for the past 8 years of so,” he wrote.
This is in part because people have been paying down their loans, income has grown in recent years, and higher education enrollment has been flat or declining – which means fewer people are taking on student loan debt.
When it comes to new students who have taken out loans, the debt per student amount has not declined, as far as Lehner can tell. In fact, it’s continued to inch upward at about the same pace of inflation over the past decade.
Lehner studied debt for all Oregon residents, not just those who attended Oregon-based colleges and universities.
“The total amount of student loan debt cancellation in Oregon looks to be around $4 billion — again sharing down some of the national estimates — or about 1.8% of all outstanding household debt in the state,” Lehner wrote.
At the individual level, he said this loan forgiveness can have a big impact, especially for people who attended college but did not graduate. These people often have relatively low levels of debt but without a college degree, they typically don’t earn as much as college graduates. This loan forgiveness could be enough to forgive their remaining debt.
From a macro perspective, Lehner said the dent the forgiveness puts in the overall student loan debt Oregonians owe is small. The loan payment deferrals amount to about 0.2% of personal income in Oregon.
Lehner said time will tell how Oregonians will spend the money they’ve saved on their student loan debt, whether they put it toward household budgets, or toward new types of debt.
According to the Education Data Initiative, in 2022, student loan borrowers in Oregon owe an average of $37,000 each. State residents have a total of $20.1 billion in student loan debt.
In Washington, the average borrower owes $35,500 and state residents owe a total of $28 billion.
Research from the Federal Reserve Bank of New York found that during the pandemic, only about 1 in 5 student loan borrowers continued to make payments on their student loans during the pandemic deferral period.
The U.S. Bureau of Economic Analysis estimates the deferral period saved people about $38 billion annually in terms of consumer spending on student loan interest. Lehner said when the BEA estimate is applied to Oregon, it suggests Oregonians have been paying about $500 million less annually on student loans since the deferrals began.
Payments on the unforgiven portions of loans will restart at the beginning of 2023.