Student Loan Forgiveness: Can The US Erase Student Debt?
- Articles, Blog

Student Loan Forgiveness: Can The US Erase Student Debt?

Americans owe $1.57 trillion in student debt. That might be a hard number
to wrap your head around. What it comes out to is $20,000 to
$25,000 for the typical borrower, but of course that’s not
evenly distributed. I have $69,812, $47,000, $350,000. More than 600,000 people carry higher
burdens of $200,000 or more. Even people over age 60 had $85 billion
in student debt in 2017, in part to help children or
grandchildren get through school. Altogether, it’s more than all the
outstanding credit card debt in the country. I think there’s a critical mass of
folks who who hope someone will do something about it. And this is a case where because
the federal government holds about 90 percent of all outstanding student debt
in the country it’s easier to make a case for them
to do something about it. Whereas if everyone didn’t want to pay
their car loan or their mortgage it’s harder for the government
to do something about that. But there are questions
about who would benefit. Student loans are largely
held by relatively affluent families. So what would it take for the
government to actually erase student debt? Democratic presidential candidates are
talking about it. But is it a good idea? Let’s start at the beginning. Student debt has been around for a
while but it’s really boomed since the turn of the century. And the government holding that much
debt is an even newer phenomenon. As part of Obamacare, the
government stopped insuring private bank loans and took a bigger
role in lending directly. The Obama administration hoped the move
would save money for the government and help offset the costs
of Obamacare during the recession. As the Federal Reserve kept interest
rates at record low levels, students could borrow at
a pretty good rate. By 2013, cries for lower
interest rates grew louder. Right now a big bank can get
a loan through the Federal Reserve discount window at a rate of about
three quarters of one percent. But this summer a student who’s trying to
get a loan to go to college will pay almost 7 percent. That isn’t right. Congress ended up passing rare bipartisan
legislation to cut rates for student borrowers, but they were
still significantly higher than what banks paid. Today, interest rates on various
federal loans rang between five percent and about seven and a
half percent, higher than the average 30-year mortgage rate. We’ve seen a dramatic increase in
the amount that students are borrowing to go to college. Obviously if individual students are
borrowing more because education is more expensive but we’re also
seeing that more people are borrowing to go to college. Another factor that kind of contributes
to that is also the budget reductions at the state level. If you think of education as an
investment, the return on that that comes from the increases in
employment opportunities and earnings generally more than outweigh
the upfront costs. So where’s the problem? Where the system kind of breaks down
is that we have a tremendous problem with college completion
in this country. A third of people, a very large
number of people in our economy, are paying for college, in many cases taking
on debt to do that, but then not getting the earning bumps
that comes along with having a degree, which means they’re having a
hard time paying back their debt. And so we’re seeing that in the
increases in student loan default rates Even though it’s unclear how much
it has hit the economy, experts believe the high level of
student debt will increasingly be a drag on growth. If all the sudden I’m not having
to make a regular student loan payment that was part of my budget, that’s
maybe a couple hundred more dollars in my pocket on a monthly basis
that now becomes fluid and flexible. Evidence suggests that a decent portion
of that would be spent. Even the Fed chair has weighed in. As this goes on and as student
loan continues to grow and becomes larger and larger, then it
absolutely could hold back growth. And for the most part it’s
almost impossible to have student debt forgiven even in bankruptcy. I’d be at a loss to to
explain why that should be the case. Since the government is charging
interest on these loans, it stands to make a potential
profit off of student borrowers. That profit number is disputed
based on different accounting methods. But many believe the government should
cut interest rates to subsidize loans instead of raising revenue. We should not be profiteering off
working families who are trying to send their kids to college. So this all brings us to the
question: Could the government just simply forgive America’s student loans? The simple answer is yes. The hard part, it would take a
new law in a potentially divided Congress. 2020 Democratic candidate Elizabeth
Warren is the first one to put out a detailed plan. The senator’s proposal would eliminate up
to $50,000 in debt for people with household incomes under $100,000,
while giving smaller amounts of relief to people
with higher incomes. The cancellation of student loan debt of
up to $50,000 for 42 million Americans. Entrepreneur Andrew Yang and
Senator Cory Booker have also said they would push
for loan forgiveness plans. Obviously you’ve got a lot of voters out
there with a lot with the debt and they’re saying well if I vote for
this candidate all of a sudden my student loans are going to go away. That’s a pretty attractive political, you
know, piece to dangle out there. I think it leaves out
a lot of unanswered questions. Even if I’m a borrower, am I
personally paying for as a taxpayer, right? Because borrowers
are taxpayers too. So it’s not like this
money is coming from nowhere. It is on the mind of voters like
Liz Smith, a 24-year-old who works in the advertising industry in
Des Moines, Iowa. Smith, who took on more than, $30,000
in debt to get through college plans to participate in
the Iowa Democratic caucuses. I recently purchased a car and I
am nervous about having a car payment and a student loan payment at
the same time, but it’s unavoidable. You have to get to work and you
also have to pay back your loans. Erasing student loans would likely
be an economic stimulus. Forgiveness of the outstanding student
loan balances with would without question be an economic stimulus. One study estimates government forgiveness of
all the loans and holders could boost real GDP
by around $100 billion. The question is what is the most
efficient way of providing stimulus to the economy. And my sense is that forgiveness of
student loan debt is is not the most efficient option. But I think you are also going to
see some concerns from the left that if you were wiping out all the
debt that that would be a pretty regressive thing to do. And once you look at the numbers,
this is, you know, looks like the Trump tax cuts in terms
of who it benefits. So it’s a little hard to be out
there saying well I’m against tax cuts for the wealthy but at the same time
want to give this this big handout to the wealthy. That’s where things get complicated. The ones with the most debt are the
ones who tend to have the highest earnings potential. So if we want to do is stimulate
the economy we can think of better more efficient ways to do that
than a sweeping program that forgives existing student loan debt. Under Warren’s proposal, debt relief would
end at $250,000 in income. Her plan would cost one and a
quarter trillion dollars over 10 years. I think there is a risk of spending
over a trillion dollars in a way that’s not particularly targeted beyond giving
it to folks who happen to borrow to go to college, or in
a lot of cases to go to graduate school, and then for whatever reason
haven’t yet paid it off. It could raise concerns about who
gets those benefits, it would raise concerns about fairness. Of course fairness is a central
question in the loan forgiveness debate. The student loan forgiveness. What about people who took
loans and paid them back? What are we going
do, give them reparations? This is a giveaway to millennials who
have had their parents and family and society pay for their bad
decisions for their entire life. There already are ways for people to
get loan relief in the U.S. Many borrowers have income based repayment
plans which can cap monthly loan payments at about
10 percent of income. But… What we’re seeing is that students
who really need the benefit of these income adjusted repayment plans aren’t
aware that they exist or if they are aware they exist are
having a hard time enrolling in them. In other countries, college is
cheaper to begin with. But on top of that, they found
creative ways to help the people that really need relief. Like in Australia. It’s done through the tax system. So when your taxes get withheld from
your paycheck every week they also take out your student loan payment. And what that means is when you
lose your job the government doesn’t come after you to pay your taxes. You don’t pay your taxes ’cause you’re not making money anymore
because you lost your job. So this works the same way with
your student loans in countries like Australia. In the UK, students don’t
have to start making payments on their debt until they make
a certain amount of money. In Sweden, borrowers have a longer period
to pay back loans than they do in the U.S. On the other side, the Trump
administration has been more focused on reducing the costs of college and
holding schools more responsible for educational outcomes. Student loan debt. I’m going to work to fix it. There is some evidence that the cost
of higher education has started to plateau. But that won’t help the
people already saddled with thousands of dollars in debt. That’s who politicians
are talking to. I do think it should be focused on the people that
need it the most. So whether that be their potential
future income or what their families weren’t able to contribute
that, you know, having huge amounts of student
debt would really impact them and their future success

About James Carlton

Read All Posts By James Carlton

100 thoughts on “Student Loan Forgiveness: Can The US Erase Student Debt?

  1. The fed let alone Uncle Sam can’t do everything—I see through thousands of financial statements from top Fortune 500 companies with net cash provided by operations in the billions, Hell Apple has trillions which won’t dent their working capital. Employers need to step up! Uncle Sam can’t fix all our problems because in the end if you forgive everyone’s debt it will enable the next generation of students to take out more student loans.
    If a company wants to bring in younger workers the should help pay for their student debt.

  2. Cancelling the student loan debt is an "economic stimulus"?


    Just make student loan debt the ability to declare bankruptcy

  3. If you forgive student loan debt today, 10 to15 years from now we will be right where we started. Forgiving student loan debt is not the solution. There is NO 1 solution to resolve this problem.

    1. A solution to resolve, those whom that have these loans today.
    2. A solution to resolve, those whom have these loans tomorrow.
    3. How society views higher education (At High School, Workforce, & So on)
    4. Setting up a system that only say 0.5% to 5% is acceptable interest for a student loan debt to be charged
    5. Setting up at the state run university & colleges with an education fee that is based on earning criteria's

    These are some of the things that can help but there is a lot more that has to be done beyond this.

  4. End government student loans. Erase the debt and stimulate the economy. If Trump were to do this and the democrats don't support it he can use it as proof they have uno intention of doing so if they are elected. If the democrats block it use it as the proof against them and his win is assured.

  5. I agree that we have been put in a tight spot because more than half of job descriptions require a 4-year degree which had increased the demand for higher education. So people dont really have many choices. HOWEVER, I have student loans, but I knew that I was responsible for paying them back when I took them out. Whats next? Car loans? Mortgages? We all pay in the end. They should just cap intererst rates at this point.

  6. If choose to Forgive existing loans, what about the potential new borrowers. To loan them or not since it will be written off anyway.. so the loan forgiveness programs will forever end tuition fees loans

  7. Conservatism is the basic principle of investing in yourself long term. Many of the communist students do not realize they are shooting themselves in the foot when they vote left.

    Liberalism=short term, benefit long term pain
    Conservatism=long term benefit, short term pain

  8. The government can but it should not these people got those loans show they need to work and pay them back talk about get an education if you're too stupid to realize how far you're going in to get and too lazy to take time off and work to earn your education then you're too stupid to be educated

  9. Why should they get their loans cancelled if I had to pay mine off like a responsible adult? Am I getting a refund for all they money I had to pay back?

  10. So people that borrow for an education to get a higher paying job want lower paid tax payers to foot the bill by "forgiveness" of the debt.

  11. Interest rate is relate to the risk. Mortgage has lower rate coz the house is the collateral. Student loan have a higher risk with no collateral.

  12. You can forgive my debt if:

    1. You don't expect to own me or my votes thereafter
    2. My income taxes do not increase
    3. Some rich person I dont know cannot own my debt by paying higher taxes
    4. I can still do business in a free market with the least amount of government intervention in my daily life

    If Democrats can't work all that out, then I will just keep paying those few pennies a month based on income and make sure my life insurance policies are enough to cover the debt when I die.

    Since I signed all the promissory notes and got all the degrees to go with that, its no problem 🤷🏾‍♀️

  13. First problem…. High schools not teaching people about interest rate , different types of interest rates and how they actually work.

    Second…… societies obsession with having a degree. What happened to on the job training?

    Third…… outrageous interest rates. If a person is not able to pay, would you rather they pay the principal and give them a " interest forgiveness" or have them default on the whole thing?

    Fourth……schools should not be allowed to charge so much. If the degree will only get you a 40,000 a year job, why is it costing 60, 000 or more?

    I don't think we should have student loan forgiveness, we should have interest rate forgiveness. It's the interest that kills.

  14. Student loan will not b forgiven. That would mean the ppl wouldnot b slaves to the govt. The govt dont want that. They want control of the ppl

  15. I was responsible and only went to college when I could afford it. So, if they're forgiving $25,000-$50,000 for people, can I put that towards my mortgage?

  16. No. The government should stay out of this. While you are at it – forgive credil card loans, car loans, mortgage loans, forgive everything. This is stupid – nobody forced them to take student loans. These are irresponsible spending on something you cannot afford.

  17. The sad part is, Bernie Supporters don't realize the negative consequence of forgiving student loans.

    Colleges will just raise prices since they know students will borrow and governments will forgive. Why not charge a million dollars tuition?

    The reason college is expensive today is because of the federal government guarantees student loans for their own profit. Colleges are taking advantage of this influx of loanable funds, just like wall street did prior to the Great Recession.

    Colleges and Wallstreet are not the enemies, they're just being manipulated by the government.

  18. not everyone should go to college. idiots are taking out student loans to get jobs that don't exist or pay crap.

  19. I owe 20,000 in student loans. Do you think the government care;not even if I passed away. not to mention,the interest rates are RIDICULOUS! I've paid over 8,000 back, and now my debt is back to 20,000, thanks to interest. I highly recommend young students to go to trade school. You'll definitely avoid being apart of this crisis

  20. Keeping the system the way it is will lead people to forgo college all together. This will in turn lead to a smaller talent pool for companies with STEM fields to choose from which also results in a bidding war for the best talent. If you think the increased cost of doctors, engineers, cyber security personnel etc. are coming out of their profits you're out your mind. It will get passed on to the consumer. Taxes or not we will pay one way or another. I've paid all my student loans and would be happy to see my peers debt forgiven.

  21. It’s a debt based money. But debt crisis is a problem when wages aren’t there to meet debts. This problem is compounded by Neoliberalism in education. Where universities operate as for profit institutions rather than as tax and monetary policy funded institutions. So prices hyperinflate and the lenders become invested in increasing education costs so that more people have to borrow. This is eventually self defeating for the lenders.

    Because we end up with a debt crisis where people don’t have enough money to pay their debts even over 20 or 30 years of employment.

    This video is pretty biased towards a more Neoliberal point of view it even quotes rush Limbaugh and Fox News. It mentions other countries but doesn’t mention that among our contemporaries higher education is usually mostly or entirely state funded. So their student debts are for housing and other costs and their student debt levels tend to be a lot lower per student.

    Typically debt forgiveness in general is really the only way that debt crisis can be fixed according to most academic economists like Michael Hudson or Steve Keen or Mark Blyth or Stephanie Kelton etc.

    When the speaker in the video frames this as money spent this statement has ignored that the money is debt based in the first place rather than sovereign money.

  22. I paid for my own college tuition. I don't want to pay for other people's debt. Maybe a better idea would be to increase the annual tuition credit from $2500 to maybe $5000. But forgiving everyone's tuition debt is crazy.

  23. I’m so glad I joined the electrical trade right after highscool, I’m a 2nd year apprentice and making bank

  24. What about Americans that didn't go to school because they didn't want to take out the loans, what do they get besides the "bill" the US government will send them to pay off others debts? I think if there is student loan forgiveness as Warren mentions, then EVERY American family with earnings under $100K should get a refund or get a "loan" that doesn't have to be paid back so that it's "FAIR" (left's favorite word).

  25. Government should rembusre employer 110% for hiring and paying off student loans tax incentive that makes it worth to do so.1 to 4 year payoff.alot of stimulus incentive around these

  26. Yes all loans should be forgiven. If we don't do it for everyone, we will do it for no one. Just look at grants, no one making more than the median income get much, if anything in grants. And yes, we should repay people some or all of what was paid in loans or tuition in the last 10 years.

  27. I like this. We have a debt of death in us that we cannot pay. God will forgive the unpayable debt of death to those that forgive the earthy debt, of another. One, is to not be compared, to the other. Ask and receive seek and find, would keep earthly debts, from accumulating. That cannot be local.

  28. You do not need to finance an expensive car to get reliable transportation to work. A better plan would be to get a cheap vehicle, pay down debt, then save and buy a newer car.

  29. For the federal government to give up such lucrative interest cashflow off student loans would be ridiculous. They have no incentive to give up that gravy train. I sure wouldn't. College education has become a religion, think of the debt as a form of tithing.

  30. So go to college.
    Get degree in sociology.
    Get job somewhere, where you won't use degree.
    Make other people pay for your bad decision.
    Makes sense.

  31. The only question should be, Do you have a job in your field of study or did you keep the laborer job because you knew you were better off?.. or.. Did a flood of IMMIGRANTS bottom out the pay of your dream job? and you cant keep up with your bills?

  32. The money that was borrowed to go to college,was to better their lives,not anyone else! They should pay them! Colleges gouged the students and made billions! Their endowments are massive! They will never get the earning bumps, because as college debt is forgiven, the government will tax them more to pay for it! And the greedy colleges live in luxury!

  33. It's a great life lesson in personal responsibility to pay for your mistakes, literally. I'm not working my ass off to pay for your student loans.Pay them yourself.

  34. I'm not even American and i say no don't forgive the debt. I say make the students make them pay it back quicker and more of their income toward their loan

  35. Of course it can. The real question is Why should it? These people entered into debt knowing that the bill would come due. Cancellation would send the wrong message. They would then think that there are no consequences to their actions.

  36. How would student debt forgiveness be fair? Easy. If debt is forgiven then that person would loose anything that was earned with it. Or a person can take the option to keep the debt and degree or cert or whatever. If people had these choices they wouldn't give up their degree and would have to quit whining.

  37. A lot of borrowers spend loan money on beer, vacations, clothes etc. am I supposed to work now to forgive someone else’s stupid decisions? Nope.

  38. 41% of students spend student loan money on non school related expenses. So the public is supposed to pay for that? NEVER.

  39. I'm a proud LEFTIST and I will NOT pay for my student loans because of the bad decisions I've made in life.
    This world is cruel and greedy and evil, our medieval thinking congressmen and congresswomen have taught me that I should be spoiled rotten!
    I have never financially helped or paid taxes.. infact I get a tax refund at the end of every year. This makes me FEEL like a slave..
    If you don't agree with my ideas then your a sexist, homophobic, racist!

  40. No such thing as forgiving debt. There is always someone paying the bill. In this case, the US tax payers are paying for this debt.

    One thing the You could do is lower the interest rate on those loans.

  41. If people aren't held accountable for their debts, then nobody will take debt seriously. Reward the irresponsible, punish the responsible. If you have loans and dropped out then you failed. Why allocate tax dollars to lawyers, engineers and other high paid people.

  42. If the Feb bailed out AIG, General Motors, Bear Stearns, Lehman Bros in 2009 and the airlines after 911, they can afford to forgive all federal student loan debt. It's called priorities. Until then, end the Federal Financial Aid program now, as U no longer get a return on investment. The entire system is broken.

  43. I would have been happy if they reinstated Perkins loan forgiveness for STEM, special education, and bilingual public k-12 teachers. There's a shortage of those types of teachers across the entire country. In some states the salaries for teachers are quite low. Compounding a relatively high student debt to that makes financial incentives to go into teaching quite low. It's generally recommended not to accrue student debt more than the first annual salary. Ideally it shouldn't be more than 50%, but it's generally acceptable for professional careers like doctors, engineers, and lawyers. As a side note, teaching is also technically considered a professional career.

  44. This is ridiculous. Students made horrible borrowing decisions. And Nw the want to screw the rest of us to pay for it? The democrats are so desperate for votes they will say anything to beat trump. Lol

  45. Nobody twisted your arm to borrow money from the government. The government gave you the opportunity to get money to go to college. If you can’t pay don’t play. The government made it easy to borrow the money so the college is naturally raised up tuitions. Blame the colleges which are mostly democratic run. So now the Democrats want to do a bail out at everybody’s expense. I’ll bet the millennial liberals love this idea more free money. Another ploy for the Democrats to get votes.

  46. Fluff fluff and more fluff. Why does the left hate talking about the cost. They always sweep that question under the rug. Who's going to pay the bulk of the 1.5 trillion?

  47. It would make sense if they allowed students to not pay taxes until their loans are paid off. For example, if you graduate, the money you're paying into federal taxes instead goes 100% to your student loan.

  48. Should’ve let the pricing system do its magic. Government intervention has once again empowered people with opportunities they may not be able to pay for. Making borrowers feel “guilty” is not the way forward.

  49. Then what? They’ll buy a house they cant afford to pay and complain that we the tax payers have to pay for it.

  50. How about credit card debt? I worked my way though college, so will you pay off my mortgage instead? Car payment? No? So it's just that people who earned scholarships or people who worked their way through college should be forced against their will to pay for people who partied the whole time instead getting worthless degrees? How about you pay it off by just taking more from people who agree to let you take their money to pay for other peoples bad choices?

Leave a Reply

Your email address will not be published. Required fields are marked *