Arkansas' student debt cancellation explained - Axios NW ArkansasLog InLog InAxios NW Arkansas is an Axios company.

Arkansas' student debt cancellation explained

Data: ; Note: Includes outstanding principal and interest balances from Direct Loans, Federal Family Education Loans and Perkins Loans; Table: Simran Parwani/AxiosICYMI, President Joe Biden plans to cancel some student debt for most borrowers. Catch up quick: Biden says he'll knock $20,000 off the student loan bills for Pell Grant recipients and $10,000 for those who did not receive Pell Grants. The forgiveness applies only to those who make less than $125,000 a year. Why it matters: The decision — which comes days before the Aug. 31 deadline, when loan repayments were set to resume after a series of pandemic pauses — is expected to alleviate some of the debt burdens of 43 million Americans while also fulfilling a key campaign promise, .Approximately 20 million Americans could have their debt completely canceled. What they're saying: Debt forgiveness generally produces what economists call the "wealth effect," in which people spend more money when they have a perceived increase in available funds, Mervin Jebaraj, director of the Center for Business and Economic Research at the University of Arkansas, told Axios.However, he does not expect this debt forgiveness to produce an immediate wealth effect because student loan payments have been on pause for two years.Student loan forgiveness will likely have an effect on longterm behaviors and factor into people's calculations as they consider buying a house or car or having children. Less debt can also make it easier to get a mortgage loan.Arkansas generally has a higher percentage of people with Pell Grants than other states, which means the state could see a somewhat higher impact, Jebaraj said. Zoom in: About 390,000 Arkansans — 13% of the state's population — have student debt, .The average borrower in Arkansas has $33,333 in student debt, meaning the average Arkansan will have just under one-third of their debt cleared. Yes, and: Arkansas has an average of . are federal grants given to undergraduate students who "" and have never earned a degree. About half of Pell Grants go to students whose families earn less than $20,000 a year. What's next: Logistics and housekeeping.Biden said Wednesday that the Education Department will in the coming weeks release a "short and simple" form for borrowers to apply for student loan relief. Get more local stories in your inbox with .Subscribe Support local journalism by becoming a member.

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