Why Canceling Student Loan Debt is a Good Idea

Why Canceling Student Loan Debt is a Good Idea

I’ve written about my own student loan debt before, so I’m definitely on board for a program that would cancel student debt, but from a macro perspective, canceling student loan debt would be for the common good.

There’s approximately $1.6 TRILLION dollars of student loans held in the United States. 

This has slowly become a discussion since Bernie Sanders started running for president in 2008 (and probably before), at least since I’ve been a voter. So as 2020 election rolls around, let’s look at the plans from two potential democratic candidates for student loan forgiveness and cancellation:

  • Elizabeth Warren’s plan:
    • Cancel $50,000 in student loan debt for every person with household income under $100,000.
    • Provide substantial debt cancellation for every person with household income between $100,000 and $250,000.
    • Not tax as income student loan debt that has been cancelled.

This plan applies to federal and private loans and would be paid for with an ultra-wealthy tax on households that make $50 million annually.  This plan would only forgive $640 billion.

  • Bernie Sanders’ plan:
    • Complete student loan forgiveness for federal and private loan holders
    • Loan forgiveness in conjunction with free college for all
    • Four-year public colleges and community colleges should be free – including tuition and fees – for everyone.
    • Federal student loan interest rates should be lower, and the federal government should not make a profit on student loans.
    • Student loan refinancing should be revamped to help save money for more borrowers. (Forbes)

Sanders would pay for it by imposing a new tax on Wall Street transactions. His campaign said the tax would generate more than $2.4 trillion over the next decade (Forbes).

So with that in mind, is this a good idea? The short answer is yes.

If we look at it from a personal perspective, removing student loans would allow an entire generation to consider home buying for the first time. We could also use disposable income for buying power (aka paying sales taxes) and other livelihood improvements. Individuals will also have the opportunity to increase their net worth if they redirected the money they were paying in loans to investments or savings.

Student loan forgiveness would have more benefits than just for personal reasons. A report shows that it will boost in GDP by an average of $86 billion to $108 billion annually over the next 10 years (NPR). Further, it would lower the average unemployment rate by 0.22 to 0.36 percentage points over 10 years and could add between 1.2 million and 1.5 million jobs per year (Market Watch).

Of the people who disagree with these plans, there are a few who are angry that they paid off their loans and wouldn’t qualify for loan forgiveness. To them I say: It’s super amazing that you have paid off your loans! That is an accomplishment that so many people are still struggling with. In an ideal world we wouldn’t really need to consider these plans because high paying jobs would be plentiful and the cost of education would be lower, but our reality is that “following your dreams” doesn’t always equal a high paying job, or some people take out loans because their parents couldn’t help them. There’s no shame in taking out a loan, but if you can’t see that this forgiveness wouldn’t affect your taxes (under the above-mentioned plans), and it would increase the overall stability of an entire generation, well, maybe get your head out of your ass and look at the bigger picture. Some programs in the United States exist for people other than you!

As the Orange President continues his reign of terror across the country, and specifically for this article, removing the public service loan forgiveness plan, we should look to candidates who understand the financial pressures each voter faces.

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