Should One Avoid Forgiving Student Loan Debt? Detailed Explained

Canceling student loan debt has been a topic of much debate in recent years, with opinions varying on the potential benefits and drawbacks of such a policy. While some argue that canceling student loan debt would provide much-needed relief to borrowers who are struggling to repay their loans, others argue that it would be a bad idea, as it would lead to increased government spending, decreased incentives for borrowers to repay their loans, and potential negative impacts on the economy.

One of the main arguments for canceling student loan debt is that it would provide relief to borrowers who are struggling to repay their loans. The cost of higher education has been rising in recent years, and many borrowers have taken on substantial amounts of debt in order to pay for their education. In some cases, these borrowers are unable to repay their loans, leading to financial hardship and, in some cases, default. Canceling student loan debt would provide immediate relief to these borrowers, allowing them to move on with their lives without the burden of overwhelming debt.

Additionally, canceling student loan debt would also help to alleviate the problem of student loan delinquency and default. When borrowers default on their loans, it can have a number of negative consequences, including damage to their credit scores and difficulty finding housing or employment. Canceling student loan debt would help to alleviate these problems, allowing borrowers to avoid default and regain their financial footing.

Another argument for canceling student loan debt is that it would provide a boost to the economy. When borrowers are struggling to repay their loans, they may be less likely to spend money on other goods and services, which can slow down economic growth. Canceling student loan debt would provide these borrowers with more disposable income, allowing them to spend more money on goods and services, which would in turn boost the economy.

However, there are also several arguments against canceling student loan debt. One of the main concerns is that it would lead to increased government spending. The government would be required to foot the bill for canceling student loan debt, which would be a significant expense. Additionally, canceling student loan debt would also result in decreased incentives for borrowers to repay their loans, as they would no longer be required to do so. This could lead to an increase in delinquency and default, which would in turn lead to increased government spending.

Another concern is that canceling student loan debt would not be a targeted solution, as it would provide relief to borrowers regardless of their income or ability to repay their loans. This could be seen as unfair, as it would provide relief to those who may not need it, while those who are truly struggling may not be helped.

Additionally, canceling student loan debt could also have a negative impact on the credit market, as it would reduce the amount of money available for lending. This could make it more difficult for borrowers to access credit in the future, which would in turn lead to a decrease in economic growth.

Furthermore, canceling student loan debt could also have a negative impact on the higher education system, as it could lead to colleges and universities increasing their tuition prices. This is because if the government cancels the student loan debt, the schools will not be held accountable for their high tuition prices and can continue to raise them. This would make college less affordable for future students, which is counter-productive to the goal of making higher education more accessible.

Another argument against canceling student loan debt is that it would disproportionately benefit high-income borrowers. According to a study by the Center for American Progress, nearly two-thirds of the benefits of canceling student loan debt would go to the top 40% of earners. This would not be a fair distribution of benefits, as the majority of the relief would go to those who are already financially.

Loan cancelation has a massive cost

The average American would end up paying a hefty price for loan forgiveness. It is unclear how much it will cost to cancel a debt because some borrowers may choose not to, but it would be substantial nonetheless.

It’s also unethical to forgive debt. If you ask the Biden administration, this is basically the same as paying people to vote for them in the upcoming midterms. Those who struggled to even graduate high school would have to pay for loan forgiveness. The typical college graduate makes substantially more than their non-graduate counterparts.

Both the cancellation of loans and the extending of the ban on interest on student loans have contributed to rising prices. It is more difficult for the Federal Reserve to achieve its goal of reducing U.S. inflation by raising interest rates when the Federal government is pursuing an expansionary fiscal policy.

The legality of Biden’s student loan cancelation is debatable

Betsy DeVos, Trump’s former secretary of education, has said that Biden’s decision to forgive student loans was improper. Many others believe that Biden lacks the authority to make such large financial choices without first getting them authorised by Congress, especially when it comes to issues like cancelling student loans.