Why student loans shouldn’t be canceled
Here’s why student loans shouldn’t be canceled.
Here is what you need to know.
Should Student Loans Be Canceled? This is the question that preoccupies 45 million student loan borrowers, some members of Congress, the President and other stakeholders. There are many reasons for canceling student loans. (You can read Part 1 of this two-part series on student loan cancellation here: 5 reasons to cancel student loans). The purpose of this series is to provide leading arguments on both sides of this important issue so that you can make a more informed decision. Some members of Congress and President Joe Biden want large-scale student loan cancellation. However, they differ on how much student loan forgiveness. Biden wants Congress to write off $ 10,000 in student loans, while Senate Majority Leader Chuck Schumer (D-NY) and Senator Elizabeth Warren (D-MA) want Biden to write off up to $ 50,000 in student loans by decree. Biden says he doesn’t support $ 50,000 student loan cancellation. Whether you support or oppose student loan forgiveness, it’s important to understand the arguments from all sides.
Here are 5 reasons not to cancel student loans:
1. The cancellation of student loans is poorly targeted
Who benefits from the forgiveness of student loans? Opponents fear that large-scale student loan cancellations are poorly targeted and invariably benefit wealthy student borrowers who do not need their student loan cancellations. For example, graduate student debt represents over 40% of unpaid student debt. This includes student loans for medical school, dental school, business school and law school. Certainly, student borrowers who attend these schools may also have difficulty with student loans, and not all are high-income earners. That said, the problem is that many high income student borrowers might get student loan forgivenesseven though they can pay off their student loans. Schumer and Warren said only student loan borrowers who earn less than $ 125,000 would qualify. Opponents believe this threshold is too high and believe that if there is student loan cancellation, it should be limited to low-income borrowers.
2. Cancellation of student loans forgets all those who did not attend university
the latest statistics on student debt show that 45 million borrowers collectively owe $ 1.7 trillion in student loans. While 45 million is a relatively high number, it is less than 20% of the roughly 250 million adults in the United States. If you have student debt and your student loans are canceled, it would definitely benefit you financially. However, the vast majority of the adult population no longer or never had student loans. This includes people who cannot afford a college or who have never attended college, who may also face financial hardship and have been negatively affected by the Covid-19 pandemic. So the political question becomes, is it fair to cancel student loans for a group of people and not provide the same financial relief to the majority of the population who may also have different financial difficulties? The “badly targeted” argument has also been extended to other forms of debt such as credit card debt, which also affect millions of young people at much higher interest rates. Additionally, mortgage debt is the highest form of consumer debt in the United States. Canceling the mortgage debt of millions of Americans could arguably benefit more borrowers.
3. Canceling student loans does not boost the economy
Warren says canceling up to $ 50,000 in student loans per borrower could cost taxpayers $ 600 billion. However, that does not mean that $ 600 billion is going back into the economy today. The $ 600 billion does not go back to the pockets of student borrowers, who can then spend the money to buy a home or support their local businesses. According to the Committee for a Responsible Federal Budget, canceling all student loan debt would produce only $ 90 billion in cash available to spend in 2021 and only $ 450 billion over the next 5 years. Why? With just once student loan cancellation, a borrower is saving money on their monthly principal and interest repayment (not their total student loan balance), which could translate into savings of several hundred dollars per month, on average. While this is a financial benefit, it is different from getting their full student loan balance in cash. Opponents of student loan cancellation say stimulus checks and unemployment benefits are better ways to stimulate the economy. If Congress wants to stimulate the economy, Congress had better give stimulus checks to all Americans and encourage them to spend money in the economy.
4. Cancellation of student loans does not solve the high cost of college education
Opponents of student loan cancellation say the one-time forgiveness of a student loan is a band-aid on a much larger and unresolved problem: the rising cost of college education. University tuition fees are only getting more expensive. Canceling student loans would help borrowers who have student loans, but it’s a unique solution. Considering the cost of college education, there will be more student loan borrowers who will face the plight of former student loan borrowers except that they will not have the benefit of their student loan cancellation. Rather than canceling student loans, Congress could find solutions to reduce the cost of higher education for all Americans. For example, Biden has a plan make public two- and four-year colleges and universities tuition-free.
5. Student loan cancellation is unfair to borrowers who have paid off student loans
Life is unfair, as the saying goes. For borrowers who have recently paid off student loans, they would not benefit from the current large-scale student loan cancellation proposals. You can call it bad luck. However, many of these borrowers also faced significant financial hardship and were successful in repaying their student loans. Many of those who delayed having families or getting married, worked multiple jobs, didn’t buy a home, and made other financial sacrifices to pay off student loans and demonstrate financial responsibility. This does not mean that borrowers who paid off student loans 30 years ago should be compensated. However, if Congress cancels student loans for some borrowers, opponents say Congress should provide compensation to borrowers who have recently paid off student loans so that they are not left out.
Pay off student loans
The next steps for canceling a student loan are that Biden is wondering if he can cancel student loans by decree. However, Biden said he believes he doesn’t have such authority. This means Congress should cancel student loans. However, Congress has not formulated a bipartisan solution that other members of Congress, beyond progressives, can support. Until that happens, student loan borrowers might not get their student loans forgiven now. Considering this, what’s the best way to pay off student loans? Here are some potential options to consider: click here to visit bridgepayday.com for free
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