Why a $2,000 Stimulus Is Great for You — Unless You’ve Got Student Loans

Portrait of a young man using protective mask at metro station.
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You may be familiar with the game “Would You Rather?” In the party game, players choose between two equally bad — or equally good — scenarios. It can lead to lots of speculation, conversation, deep thought and laughs. But if you’re paying off student loans, the answer to the question, “Would you rather get $2,000 this month or have your student loan debt wiped out?” should be a no-brainer.

See: Your Top Student Loan Debt Cancellation Questions Answered
Find: 9 Ways Student Debt Is Affecting Every Aspect of Americans’ Lives

Students who graduated in 2019 left college with an average debt of $30,062, says U.S. News & World Report. A $2,000 stimulus payment per person might help to pay rent, utilities and your car loan for a month. But having up to $50,000 in debt forgiven could open the door to financial freedom for the 42 million Americans facing student loan debt.

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If President-elect Joe Biden follows through on his promise to send $2,000 stimulus checks to Americans “out the door immediately” upon taking office, however, those with student loan debt may not have a choice between $2,000 cash now or tens of thousands of dollars in loan forgiveness.

What does one have to do with the other?

See: Here’s How Student Loan Borrowers Really Feel About the Election
Find: Third Stimulus Check Likely Coming Under Biden — How Much Could You Get?

First, paying off student loan debt is an expensive choice. Loan forgiveness could cost the federal government $400 to $450 billion, according to Forbes. And stimulus checks, while also expensive, would put money in the hands of more people.

The proposed stimulus checks could be part of The Heroes Act, a stimulus package that was stopped by Republicans in Congress last year. The act also included $1 trillion in state and local aid.

States could, in theory, use that aid to distribute and administer COVID-19 vaccinations faster and more effectively. Giving more people immunity to the virus could help jumpstart the U.S. economy better than any aid packages, but states are struggling right now. The Centers for Disease Control and Prevention stated that more than 70% of our vaccines still have not been used.

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See: What if Biden Can’t Cancel Your Student Debt? Here Are 15 Ways to Pay Off Those Loans
Find: How Gen Z Plans to Avoid Student Loans

When it comes to more coronavirus aid — for businesses, states and individuals — or student loan debt forgiveness, we face a classic case of the good of the many outweighing the needs of the few. Even if the few, in this situation, total 42 million Americans facing student loan debt they might never pay off.

Of course, a compromise is possible. Biden could opt to forgive up to $10,000 in student debt per person, or put income caps on debt forgiveness, and still distribute stimulus checks.

But in the midst of negotiations for another coronavirus stimulus package and vaccine distribution woes, student loan debt forgiveness could be tabled in favor of more immediate concerns.

After all, one in seven student loan borrowers were already in default prior to the pandemic, and the CARES Act only provided temporary relief from payments.

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About the Author

Dawn Allcot is a full-time freelance writer and content marketing specialist who geeks out about finance, e-commerce, technology, and real estate. Her lengthy list of publishing credits include Bankrate, Lending Tree, and Chase Bank. She is the founder and owner of GeekTravelGuide.net, a travel, technology, and entertainment website. She lives on Long Island, New York, with a veritable menagerie that includes 2 cats, a rambunctious kitten, and three lizards of varying sizes and personalities – plus her two kids and husband. Find her on Twitter, @DawnAllcot.

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