Is student loan forgiveness going to make inflation worse?

Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations.

A Note From Kelly Anne

It’s been a whirlwind week since President Joe Biden announced he will cancel up to $20,000 in federal student loans for qualifying borrowers. This week’s newsletter is all about Biden’s plan: Who qualifies, how to get your loans forgiven and what canceling student loan debt might mean for inflation.

Best,

Kelly Anne

Senior Staff Writer

Consumer Finance

Everything You Need To Know About Biden’s Plan To Cancel Student Loan Debt

It finally happened: Federal student loan debt is being forgiven.

In Biden’s plan, qualifying federal student loan borrowers who received Pell Grants will see $20,000 of their federal student loan debt erased. But they must meet the income requirements: a $125,000 cap for individuals, and $250,000 for those who file taxes jointly.

All other borrowers who meet the income requirements will have $10,000 of their debt erased. 

Some 8 million borrowers will see their loans automatically forgiven; everyone else will have to submit their income information to the Department of Education via an online form that’s expected by early October.

But this big announcement is already generating controversy. 

While some are arguing that it’ll make inflation worse, economists counter that it will barely move the needle on the inflation rate. However, economists warn that what we really should watch is how forgiveness may influence future tuition costs and how universities may start charging higher tuition as a result.

Here’s what else you should know
this week:

If Biden Forgives Your Student Loan, Will You Owe Taxes?

Questions about taxes are popping up now that the cancellation of student loan debt is set to become reality. If Biden wipes out your student loans, will you be stuck with a tax bill? Here’s a look.

Wells Fargo has released a true high rewards card that offers 3X points on everyday purchases, which can really add up. The new Wells Fargo Autograph^SM Card is a great choice for earning rewards as the costs of essentials rise with inflation.

This includes earning unlimited 3X points per dollar at restaurants, travel, gas stations, transit, popular streaming services and phone plans. Plus, earn 1X point per dollar on other purchases. The points don’t expire as long as your account remains open. 

In addition to earning 3X points across many of the categories where consumers spend most, Autograph offers other benefits to make your summer even sweeter, including cell phone protection, zero liability protection, access to My Wells Fargo Deals and travel benefits.

Identity theft is an enormous problem that’s only getting worse. In 2021, 42 million U.S. adult victims lost $52 billion to identity fraud—way up from about 17 million victims and nearly $17 billion in total losses during 2017, according to Javelin Research.

One way to fight back is by freezing your credit, to protect yourself from ID theft by preventing unauthorized parties from accessing your credit reports. Freezing your credit can be a meaningful way to guard your credit files.