Why Student Loan Forgiveness Is a Bad Idea

Student loan forgiveness releases borrowers from their obligation to repay part or all of their federal student loan debt.

What is Student Loan Forgiveness?

Student loan debt makes up the second-largest amount of debt in the United States, behind mortgage debt. As of 2021, student loan debt totaled $1.75 trillion.

If student loan forgiveness were to happen, this begs the question of who would benefit the most?  The answer is those in the upper half of the income distribution and those with graduate degrees.

The Underlying Issue

The bottom line is that reform is needed in the student loan program and college education in general, and canceling student loans doesn’t do much to fix these issues.

Inflation is currently at the highest level in decades, the job market is at an almost unhealthy low unemployment rate, and the housing market has been out of control over the past 18 months.

The Alternatives to Student Loan Forgiveness include improving income-based repayment plan programs, allowing student loans to be discharged in bankruptcy, or forgiveness for the low income population

The two overarching questions asked in this story are 1) are we helping the right people? 2) with the economy already on the verge of overheating, is this the right time to consider student loan forgiveness?

What good is allowing a few hundred dollars of student loan debt to be forgiven if it results in even higher inflation that increases the cost of goods in all other areas?

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