Sunday, April 17, 2022

Canceling student debt...Why can't this be seen for what is it? It is a bribe, plain and simple!

According to Forbes, the plan to canceling student debt is a bad idea.  Here's why.

You’ve heard the reasons why we should cancel student loans. Here are some reasons not to cancel student loans.

Here’s what you need to know—and what it means for your student loans.

Student Loans

Will your student loans get cancelled? Some members of Congress and President-Elect Joe Biden have proposed to cancel student loans. Among the many proposals for student loan forgiveness, the most recent has gained some traction: a plan to cancel up to $10,000 of student loans. According to Sen. Elizabeth Warren (D-MA), there are several reasons to cancel student loans. For example, student loan forgiveness could help a generation of borrowers start their lives debt-free. The latest student loan debt statistics show that 45 million borrowers collectively owe more than $1.6 trillion in student loan debt. This can help student loan borrowers get married sooner, start a family, buy a home and save for retirement. Warren also says that cancelling student loans can reduce social and racial disparities.

As Congress, the president and policy experts debate the future of student loans, it’s important to understand both sides of the “cancel student loans” issue. What are the arguments against cancelling student loans?Here are 5 reasons not to cancel student loans:

1. Cancelling student loans for everyone excludes 200+ million people

There are approximately 250 million adults in the U.S. Of this total, only 45 million are student loan borrowers. While that number is significant, it’s less than 20% of the total adult population. Forgiving student loan debt certainly would benefit these individuals. However, more than 200 million adult Americans no longer have, or never had, student loan debt. Is it fair to cancel student loans for this sub-section of the population, while the majority of the population (who may face other, important financial challenges) do not receive commensurate financial support? Many federal taxpayers may not want to subsidize the cost of student loan debt cancellation, which could cost nearly $400 billion, while they receive no financial benefit.

2. Cancelling student loans invariably benefits wealthier Americans with graduate degrees

Who benefits from student loan forgiveness? Graduate school debt accounts for more than 40% of all outstanding student loan debt. This includes student loans for medical school, dental school, business school and law school. While each of those degrees can cost hundreds of thousands of dollars in tuition, student loan borrowers who hold these degrees tend to earn significantly higher income. This is not to say that some borrowers with graduate degrees do not struggle with student loan repayment. Many do, and not all student loan borrowers with graduate degrees earn significant income. That said, cancelling student loans for all student loan borrowers would mean that high-income borrowers receive student loan forgiveness, even if they can afford their student loan payments. Therefore, student loan forgiveness would not be targeted optimally to student loan borrowers with low income, who didn’t attend college or who are unemployed, for example. The Heroes Act—the $3 trillion stimulus plan House Democrats passed earlier this year—included a provision to cancel $10,000 of student loans for borrowers who are “struggling economically.” If legislators proceed to cancel student loans, they may want to consider imposing an income limit or tying student loan forgiveness to unemployment or other financial struggles as a result of the Covid-19 pandemic or the economy, for example.

JediConservative Comment.  This is NOT a good way, by the way!!!  It causes inflation!!!!  

3. Stimulus checks and unemployment benefits may be better ways to stimulate the economy 

Some have argued that student loan forgiveness is smart policy to stimulate the economy. However, research shows that stimulus checks and unemployment benefits are better ways to stimulate the economy. For example, the Committee For A Responsible Federal Budget says that cancelling $1.6 trillion of student loan debt would produce only $90 billion in available cash to spend in 2021 and only $450 billion over the next 5 years. Why? The reason is that $10,000 of student loan forgiveness does not equate to giving every borrower $10,000 in cash. Rather, with student loan debt cancellation, borrowers save an amount of cash equal to their principal and interest payments, which could result in several hundred dollars in savings per month, on average, for example. If Congress wants to stimulate the economy, Congress would be better off giving stimulus checks to every American and encouraging them to spend.

JediConservative Comment.  This is the best reason to NOT cancel student debt, by the way!!!  It will be seen as bribe!!!!

4. Cancelling student loans is unfair to borrowers who paid off student loans

If there is student loan cancellation, it would benefit only borrowers who hold student loans on the day student loans would be cancelled. That means if you paid off student loans in full the day before, you would be out of luck. Many student loan borrowers paid off student loans by working multiple jobs, foregoing buying a home or delaying other important life decisions. Will these borrowers who also may have struggled receive any commensurate compensation? Congress could consider a reasonable look-back period to account for student loan borrowers who paid off student loans during a specific period prior to any potential student loan cancellation.

5. Cancelling student loans doesn’t address the high cost of education

Cancelling student loans could provide some immediate relief to current student loan borrowers. However, the day after student loans are cancelled, students will continue to borrow tens of thousands of dollars to fund their education. While a college or graduate degree generally leads to higher earnings, student loan debt cancellation doesn’t address the underlying issue: the cost of higher education. Congress may be more impactful by focusing on ways to make college and graduate school more affordable.

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