Joe Biden made several promises during his election campaign. One of the most prominent policies he swore to enact after taking office was student loan forgiveness, something many people voted him for. He kept his word and is now offering up to $1 trillion in debt forgiveness, a policy that’s primarily celebrated but also questioned.
Will student loan forgiveness leave a positive impact, or will its repercussions have consequences for those without student debt? Let’s take a look at all sides before deciding on a position.
How We Benefit From Student Debt Relief
Many argue that student debt has crippled the economy by less consumer spending, lower net worths, creating an entire generation unprepared for retirement. If they’re freed from the shackles of debt, they could put money in assets like home ownership or starting a family, overall boosting the economy.
People of color will especially benefit from this, which could bridge the gap in racial inequality.
Negatives of Student Loan Forgiveness
On the other side of the argument, student loan forgiveness will drive up inflation, increasing demand for things people couldn’t afford with debt. The trillion dollars being waived will come out of taxpayers’ pockets, even if they don’t have student debt.
But whether the policy is a net negative or positive depends on which political party you support. Left-leaning people celebrate this policy, while people on the right see it as a giant wrench in capitalism.
The Next Financial Crisis
Economists on both sides are taking on the wild, wild West that is the higher education system in the U.S. While some believe it’s exaggerated, others argue that student debt relief benefits the wrong borrowers. Debt cancellation helps the top 20% of income earners more than the bottom 20%.
The average loan balance at graduation has also tripled since the 90s and around 7% of student loan borrowers are more than $100,000 in debt. Without intervention over the next two decades, rising student loan debt could hit $3 trillion. If this pattern continues, it will slow down the U.S. economy and become a national crisis until there’s a solution.
