Pro: Forgiving student loans benefits the economy and closes social gaps.
There’s a reason why high school and college students alike search far and wide for any type of scholarship or grant that could fund their college tuition: college is really expensive.
However, with President Joe Biden in office, college students, current or past, may be looking at relief from their financial burdens. The president aims to forgive $10,000 of debt per borrower through an executive order. As college tuition prices increase each year, public funding decreases, causing students to be left with insurmountable debt. Therefore, student loan debts should be forgiven by the government to alleviate financial burden on millions of Americans, to simulate the economy and to close social gaps.
Relieving $10,000 of student loans would help stimulate the economy, as it would help millions of Americans pay off all, if not most, of their debts. Based on fourth quarter data from the Federal Student Aid, forgiving $10,000 would benefit 75% of borrowers. And according to a 2018 Levy Economic Institute of Bard College paper, a one-time cancellation of the $1.4 trillion student debt held would translate to an increase of $86 billion to $108 billion a year, on average, to GDP. This is possible because borrowers with fully or largely forgiven debts have more freedom to invest elsewhere, like retirement, starting a business, or even buying a house. Houses, and land, are investments that generate wealth with time, which helps those of low socioeconomic standing create generational wealth.
Besides freeing money that could stimulate the economy, forgiving $10,000 in student loans will also narrow social gaps. A 2016 Brookings Institute report stated that on average, black students owed $7,400 more than any other race group, and that amount only multiplied. Four years following graduation, black borrowers owe twice as much as white borrowers, and over half the amount is interest. In addition, they are more likely to experience negative financial events after graduation like higher interest rate payments, as well as discrimination in labor markets. This prevents them from accessing wealth-building opportunities that can end generational wealth disparities. Relieving some of their financial burden can finally end the cycle of poverty perpetuating communities of color.
Some may question why only one generation of college students should be forgiven, however they fail to recognize that one generation could be the catalyst for long term change. The executive order can potentially help up to 9.8 million people afford housing, and with it, a family, retirement, and other luxuries that many take for granted. As a member of the Congressional Oversight Commission Bharat Ramamurti said, student loan forgiveness will essentially put about $3,000 back into American pockets each year, all of which can be used towards their community and livelihoods. One generation is necessary for change to be enacted in order to benefit future generations, and by taking that step now, we can start making strives towards a more inclusive and wealthy future.
While this solution does not address the root of the student loan crisis, it would bring relief to millions of Americans. The executive order would help stimulate the economy, which is necessary during these trying times, as well as help narrow social gaps that keep people of color in poverty. Strives made by President Biden and the American government will help bring a generation out of debt. Suddenly, college doesn’t sound so bad.
Vy is a junior and second-year staff writer for El Vaquero.
Con: Forgiving student loans does not eliminate the larger issues.
During President Joe Biden’s presidential campaign, he voiced his support for the immediate cancellation of $10,000 or more in federal student loans per borrower, an initiative proposed by Senator Elizabeth Warren amidst the coronavirus pandemic.
Student loan forgiveness is releasing borrowers from having to repay federal student loans to finance post-secondary education as a part of Covid relief funds. President Joe Biden’s campaign platform included ambitious changes for higher education where he plans to provide relief for student loan borrowers. Democrats have proposed different legislation with varying amounts of what should be forgiven, however, student loan forgiveness shouldn’t be the solution to provide relief.
Eliminating student loans debt doesn’t eliminate the larger problems of the expensive price tag that comes with colleges. According to New York Times national economy writer Patricia Cohen, the problem at hand is that colleges are charging these high prices because several students are willing to pay these costs in order to advance their careers, as employers naturally associate education with qualification. Students continue to pursue getting higher education, putting them into debt that often takes several years to pay off. Even when students take out student loans, they may not be reaping the benefits, as a degree does not guarantee a job. Others may not even be able to finish their degree but already took out loans, putting them in a cycle as they are unable to repay loans without a higher paying job but can’t get a job without a degree.
Canceling student loans doesn’t stimulate the economy. During the last few months amidst the pandemic, many have called on Biden to forgive student loans in order to stimulate the economy; however according to the Committee of a Responsible Federal Budget, canceling student loans will only increase cash flow by $90 billion per year but cost over $1.5 trillion, putting us either further into debt or increasing taxes among the American people. Canceling student debt doesn’t seem to stimulate the economy as much as other relief programs such as extending unemployment benefits or state and local aid.
In theory, canceling student loans may seem great by canceling $1.7 trillion among 45 million Americans, however, the plan is poorly targeted as the plan only benefits less than 15% of the American population. Of those who need to repay student loans over 75% of those paying are in the top 40% income bracket. The current plan is to cancel student loans of people who make an income less than $125,000, which Forbes Personal Finance Contributor Zack Friedman claims may be too high of a threshold and inadvertently benefit the wealthy who do not need student loan cancelation. Although an idea proposed to benefit those who are struggling financially due to the Covid-19 pandemic, forgiving student loans will not only not benefit the vast majority of Americans but also help the wealthy become richer.
Student loans forgiveness is not the solution to solve our economic problems especially during a time of covid. The one-time forgiveness will not benefit the future borrowers and those who have already paid off their debt, and rather put more of the financial burden on Americans.
Brianna is a senior and executive editor for El Vaquero. This is her third year on staff.