Some who oppose student loan forgiveness view education as a private commodity that benefits the person who purchases it."
When the government forgives loans, it's not erasing debt but shifting it from individuals to taxpayers. This increases government debt, which can have long-term economic consequences. Poor people might seem to benefit initially, but everyone pays the price later through potential inflation or higher taxes.
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.
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.
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.
Student Debt vs Income by Age Groups
Among the age groups, adults between the ages of 18 and 29 are the most likely to have student loan debt. Meanwhile, adults between the ages of 35 and 49 years old on average owe the most student loan debt.
Borrowers can face collection fees; wage garnishment; money being withheld from income tax refunds, Social Security, and other federal payments; damage to their credit scores; and even ineligibility for other aid programs, such as help with homeownership.
Student loan debt slows new business growth and limits consumer spending. Broad student loan debt forgiveness may help boost the national economy by making it more affordable for borrowers to participate in it.
Key Takeaways. Carrying student debt can affect your ability to buy a home if your debt-to-income ratio is too high. If you have too much student loan debt, you won't be able to save as much for retirement. Student loan debt can lower your credit score, especially if you fail to make on-time payments.
In particular, the tendency to express forgiveness may lead offenders to feel free to offend again by removing unwanted consequences for their behavior (e.g., anger, criticism, rejection, loneliness) that would otherwise discourage reoffending.
It may take years to reestablish a good credit record. You may not be able to purchase or sell assets such as real estate. Your loan holder can take you to court. You may be charged court costs, collection fees, attorney's fees, and other costs associated with the collection process.
Student loan relief contributing to 27% jump in projected federal budget deficit, per CBO. Lawmakers will have to contend with even larger federal budget deficits, according to the Congressional Budget Office.
Most student loans — about 92.4% — are owned by the government.
Billionaire Robert F. Smith pledged to pay off student loans for every member of Morehouse College's graduating class. The Ivy League-educated business leader made his fortune investing in software firms and other tech companies.
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.
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.
Individuals who receive debt forgiveness would have more disposable income to afford basic necessities, purchase homes or even start their own businesses. However, debt forgiveness could encourage future students to take on more debt or encourage some universities to charge more for tuition, Jones said.
One model estimates a negative ROI for partial loan forgiveness with each dollar spent on student loan forgiveness returning between 2 and 27 cents in economic activity. In order to fight higher inflation rates, experts predict that the federal reserve would need to raise interest rates by 50 to 75 basis points.
Your interest charges will be added to the amount you owe, causing your loan to grow over time. This can occur if you are in a deferment for an unsubsidized loan or if you have an income-based repayment (IBR) plan and your payments are not large enough to cover the monthly accruing interest.
Importantly, this plan would also help more than 40 million student borrowers, many of whom are at risk of delinquency or default because of hardships brought on by the COVID-19 pandemic. In fact, more than half of all student borrowers say their entire financial stability depends on loan forgiveness.
The average federal student loan debt is $37,853 per borrower. Outstanding private student loan debt totals $128.8 billion. The average student borrows over $30,000 to pursue a bachelor's degree.