Following the Biden administration’s Aug. 24 announcement of a sweeping plan to reform the student loan process for millions of federal borrowers, local educators said they see both benefits and challenges lying ahead.

The proposal, one of Joe Biden’s chief promises during his 2020 presidential election campaign, could eliminate student debt entirely for nearly half of all borrowers, according to an analysis by the education department, which estimates 43 million Americans have federal student loans.

It seeks to do this by forgiving $10,000 of federal debt for all borrowers making no more than $125,000 per year — and no more than $250,000 for married couples — and up to $20,000 for borrowers who receive Pell Grants. It will also cap monthly payments at 5% of a borrower’s income and eliminate accrued interest for borrowers making monthly payments, even when that payment is $0.

Taken together, these reforms could make it easier and faster for the bulk of students to pay off their debt, educators said.

“This is going to make that burden less severe,” said Ariel Mendez, director of financial aid at Arapahoe Community College. “This is a step, it’s not everything, but it’s definitely a step.”

Since Biden unveiled the plan, Mendez has been fielding calls from ACC students eager to know if and how the relief may affect them. Mendez said last year about 1,600 of the college’s roughly 12,000 enrolled students took out loans and she believes most, if not all, could be eligible for forgiveness.

The relief could be huge for students teetering on the edge of finishing a degree. Facing a rising cost of living from housing to food, making monthly loan payments can spur some students to drop out of their education, Mendez said.

“This is students being able to finish degrees,” Mendez said, adding the cap on monthly payments and elimination of interest rates “is a pretty big deal” for financially-stressed students.

But borrowers, whether they’re in school or not, still have several hoops to jump through before they see loan relief. The education department is preparing to launch an online application in early October that could get borrowers relief within four to six weeks of applying.

That application must be filed before Nov. 15 and will only apply to loans borrowed before June 30. Mendez said part of her job is now making ACC students aware of the timeline and process to ensure they receive relief.

Biden’s plan has been met with ire from those who feel it will alienate taxpayers — the vast majority of whom do not hold federal student debt— as well as borrowers who feel it does not go far enough, with some calling for up to $50,000 in debt cancellation.

And concerns over its impact on inflation and whether it’s fair for borrowers who already paid off their debt have risen to the forefront of the loan forgiveness debate.

Joe Garcia, president of the Community College System — which encompasses 13 colleges with 35 locations across the state — said he opposed broad debt cancellation, especially for higher income earners, but became supportive of Biden’s plan.

“I think it’s well-tailored, but not perfect,” Garcia said.

According to the Biden administration, nearly 90% of the debt cancellation will go to low and middle-income borrowers making less than $75,000 a year. Most of those borrowers owe between $8,000 to $10,000, Garcia said, a demographic that will more often default on payments and who Garcia said need relief most.

He believes the plan will have a minimal impact on inflation. Loan payments have been paused since the beginning of the COVID-19 pandemic and the pause has been extended to Dec. 31 under Biden’s plan.

Garcia said the moratorium demonstrates that not repaying loans has had little correlation to inflation. And since the loans were already paid out by the government, it has been debated if taxpayers will really foot the bill for the cancellation, or if Congress will simply lose those repayments as a source of revenue.

“I think it will have a significant impact on the ability of individuals to improve their credit ratings, return to school and I hope that those things will ultimately benefit the economy,” Garcia said.

Going beyond the $20,000 maximum for debt cancellation would have been a “bridge too far for most taxpayers,” Garcia said, adding Biden’s plan is a “reasonable compromise.”

For borrowers owing well above $20,000, the impacts of Biden’s plan could provide piecemeal progress.

Rachel Newlon, a full-time English teacher at ACC, holds $150,000 in student debt. Newlon said she had little-to-no financial aid when she pursued her undergraduate and graduate degrees. Debt, she said, was the price for an education.

“It just seemed like the easiest way to go,” she said. “I made the choice to go to school because I wanted to go into an employment that was more rewarding … but we shouldn’t be penalized for that.”

Newlon believes she will qualify fo $10,000 off her loans. But what excites her more is the reduction in monthly payments and cancellation of interest.

“Having a little bit of help is nice because I don’t make enough money to throw large sums at bringing it down,” she said, adding she makes about $75,000 yearly.

And the cost of loans is more than just monthly payments, Newlon said. It has affected her otherwise healthy credit score, hampering her prospects of owning a home.

While she said Biden’s plan provides welcomed relief, it falls short of addressing the greater need to bring down the cost of college, she said.

“There’s clearly acknowledgment that there’s an issue,” Newlon said.

According to a report from the Georgetown University Center on Education and the Workforce, between 1980 and 2019, the average price for college increased 169%. Yet wages have lagged far behind.

Garcia said what little federal aid there is for college, such as Pell Grants, has also failed to meet today’s tuition costs. According to the Biden administration, those grants used to cover nearly 80% of tuition and now only covers a third.

Biden had tried to boost Pell Grants through sweeping social policy legislation last year but those efforts died in Congress after failing to gain enough support in the Senate.

“A hard-working student simply cannot go to school and pay their own way even at a state school,” Garcia said. “I think that’s what critics of my age tend to forget when we pat ourselves on the back saying ‘we paid our own way.’”

Published on ColoradoCommunityMedia.com.