When debt burdens are lifted, student borrowers can start new businesses and in turn, create job opportunities for others. They can buy homes for the first time in their lives, pay down other debts such as their credit card bills, and have less reliance on social safety net programs.
With debt forgiveness, creditors pardon some or all of your debt. Various types of debt may qualify for forgiveness. Debt forgiveness can offer relief from overwhelming financial burdens, but it does have downsides. Debt forgiveness is only one option for managing difficulties with repayment.
"And if you assume there's a likelihood it's canceled, you're going to be more likely to take out more debt up front. That's going to give colleges more pricing power to raise tuition without pressure and to offer more low-value degrees."
"Democrats may express views about education contributing to the public good and supporting an engaged citizenry. Some who oppose student loan forgiveness view education as a private commodity that benefits the person who purchases it."
Summing the likely consumption effects of the Administration's student debt relief and SAVE programs results in billions of dollars in additional consumption annually.
1 Forgiveness is fundamentally unfair because it will ultimately be paid by taxpayers—many who have faithfully paid off their student loans, worked hard to pay for college, or chose not to go to college at all.
It penalizes hard-working Americans
We've already discussed how the poor and working classes are treated unfairly by this plan. But the unfairness extends to many middle class families as well who worked hard to pay off their student loans or their children's student loans.
Consistent with predictions derived from theories of operant learning, perhaps forgiving relatively disagreeable or negative partners led to decreased self-respect and increased problem severity in those studies because it failed to discourage those partners from continuing their negative behaviors.
It could cause long-term damage to your credit
Debt forgiveness programs almost always come with a significant impact on your credit score. When you stop making payments to your creditors while the settlement process is ongoing, your accounts will become delinquent, which will be reported to credit bureaus.
Generally, if you borrow money from a commercial lender and the lender later cancels or forgives the debt, you may have to include the cancelled amount in income for tax purposes. The lender is usually required to report the amount of the canceled debt to you and the IRS on a Form 1099-C, Cancellation of Debt.
Student loan debt cancellation is essential to the financial wellness of millions of Americans. With student debt cancellations, people will be able to pay off other debts, purchase homes, and invest in their communities, futures, and the American economy.
Black adults are more than twice as likely than white adults to have student loan debt. The following graph includes federal and private student loan debt among all adults. On average, Black adults in the U.S. also hold higher student loan debt balances than borrowers of other races.
Two Weaknesses of Forgiving: It Victimizes and Stops Justice | Psychology Today.
Positive (or emotional) forgiveness is a therapeutic process of absolute forgiveness, which also involves reinstituting positive feelings and thoughts toward the offender. Negative forgiveness, on the other hand, is a situation in which forgiveness is extended while brooding over the act of transgression.
Clearly, when God forgives He removes the eternal consequences of our sins (Romans 6:23), but there are many examples where such forgiven people still had to face the lingering physical consequences, as in the case of David (2 Samuel 12:10-14).
We know that canceling student-loan debt takes money from the broader tax base—mostly made up of workers who did not go to college—to subsidize the education debt of people with “valuable” degrees. We know that higher-income families tend to borrow the largest amounts.
If the debt forgiveness program is permitted to move forward, at a time when consumer spending already is high, it could lead to more inflation, Jones said. “We certainly don't have a consumer spending problem right now,” he said.
Another concern of forgiving student debt is “moral hazard,” the idea that students might make riskier choices if they think their debt will end up being forgiven, Jones said.
Student loan balances may seem stagnant due to the significant portion of payments going towards interest rather than the principal. Initially, a larger share of a student loan payment is allocated to interest, with a smaller amount reducing the principal.
As of mid-July 2023, approximately 662,000 borrowers have qualified for forgiveness under the limited PSLF waiver.