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Debt

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WASHINGTON (AP) — The Senate dodged a U.S. debt disaster Thursday night, voting to extend the government’s borrowing authority into December and temporarily avert an unprecedented federal default that experts warned would devastate the economy and harm millions of Americans.

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Student loan debt doesn’t just cause financial harm to borrowers. Kate Padgett Walsh, an associate professor of philosophy at Iowa State University, argues that it also causes mental, emotional and physical harms as well.

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Some economists argue that relieving student loan debt will help boost the economy. However, William Chittenden, an economist at Texas State University, writes that the economic benefits of canceling student debt might be modest at best.

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Colleges and universities are using federal money from the American Rescue Plan to clear outstanding debts for students and recent graduates who enrolled in their institution on or after March 13, 2020. Both students and their respective institutions will benefit from this debt clearance, according to Chittenden. The debt clearance will enable students to continue with their education and pursue career goals, he writes. Meanwhile, institutions will be able to clear debts without tapping into their own finances.

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As things stand now, student loan borrowers are mostly barred from discharging their loans through bankruptcy. However, under the proposed FRESH START through Bankruptcy Act, borrowers can get their federal loan debts discharged if they prove that the debt caused “undue hardship” during the first 10 years of payment.

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