The Student Loan Forgiveness Fiasco

“Loan forgiveness may encourage reckless borrowing, if today’s college students think they won’t actually have to pay back their loans. And this, in turn, could lead to even higher college tuition rates. It could also be inflationary more generally, by freeing up income for tons of people who may then drive up demand for goods and, along with it, prices.”

“The program amounts to a massive subsidy for middle-class Americans, as opposed to benefiting the most economically downtrodden or financially strapped. It provides a handout to many people for whom loan payments aren’t a problem now (someone making $125,000 per year can surely afford a few hundred dollars per month) or won’t be in the very near future (for instance, a doctor or lawyer on the verge of making big bucks who hasn’t quite gotten there yet). In short, the program “consumes resources that could be better used helping those who did not, for whatever reason, have a chance to attend college,” as economist Larry Summers put it on Twitter

“Certainly not everyone who had to take out student loans was lazy, irresponsible, or anything of the sort. And not everyone without student loan debt is responsible or hard-working; many just lucked into having parents who could afford to pay for college. But there are many people for whom avoiding student loan debt or paying it off promptly meant making all sorts of sacrifices. Biden’s loan forgiveness program says to them that this thrift, practicality, etc. may have been for nought.”

“to simply write off existing student loan debt without addressing the source of the fast rise in college prices —which has a lot to do with the federal student loan program existing—is only ensuring ongoing problems.”

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