With the presidential election looming, candidates are rolling out their new plans for a variety of topics, including student debt loan forgiveness.
Elizabeth Warren rolled out a student loan forgiveness plan that allowed for households earning under $100,000 to be forgiven up to $50,000 of student debt loans.
Bernie Sanders recently declared that he would like to get rid of all $1.6 trillion of student debts currently owed.
The plans differ in the amount of money covered and what section of society is helped the most.
“Elizabeth Warren’s plan, which caps forgiveness at $50,000 a person and lowers it for higher earners, would mostly help the middle class,” wrote Jordan Weissman in a column for Slate. “Forgiving all debts, as Bernie Sanders has proposed, would give a disproportionate amount of help to lawyers and doctors with expensive professional degrees.”
As a struggling college student, the idea is definitely appealing. Why would I ever pass up an opportunity to have all of my loan debt covered?
Naturally, many college students or recent graduates may think the same thing. If their debts can be covered and removed, they are more likely to vote for that candidate.
“More than 44 million borrowers also owe their share, with more than 1.3 million owing six figures or more on their loans,” according to Forbes contributor Robert Farrington.
However, the idea of a mass forgiveness could drastically affect academic and economic systems in a negative way.
School systems, if all debt is forgiven, would be able to increase prices with no governmental interference whatsoever.
Abigail Hall Blanco is an associate professor at the University of Tampa in economics and said it would not be ideal academically or economically to cancel student debt totally.
“If schools knew the government would forgive the cost of their students’ education, they’d face no incentive to cut costs to keep tuitions down,” Blanco said. “By forgiving loans, the government would encourage students to undertake education that may be a poor investment because they would not face the consequences of their choices. Who would pay for all this? The taxpayers.”
The plans to cover all the debt would have to entail rather expensive plans with high taxes over a long period of time. To cover such a steep price, the tax increase could cripple more families financially.
The results of forgiving all student debt can also have moral implications.
What happens to all the people that have already paid off their student loans or have not gone to school yet? These people would get the short end of the stick; the only people who benefit are those with the current debt.
The best solution could be, instead of total forgiveness, focusing on reform on the current payment system for student loans. Perhaps with reform, there could be partial forgiveness and easier payments for recent graduates.
The idea of total student debt forgiveness seems like it is a wonderful, no-strings-attached plan to benefit everyone, but that is certainly not the case.