Should student loans receive the grace of widespread forgiveness? In a recent GOBankingRates poll on the topic of student loan forgiveness, 47% of the 9,741 responses replied no. The “yes” answers to forgiving all of student debt (34%) and yes but only in the case of federal loans (15%) barely eclipsed the no percentage at a total of 49%.
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There are many reasons why the topic of student loan forgiveness is polarizing in terms of public opinion. Here, we examine why it is often difficult to come to terms with forgiving student debt, but how debt forgiveness can be good for our economy in the short- and long-term.
Why Aren’t More People in Favor of Student Debt Forgiveness?
I am a former student loan borrower. I managed to pay off my student loan debt totaling almost $56k in 2019. The process was difficult. It required making many sacrifices such as living with roommates instead of having my own apartment and working multiple jobs.
Yet, I did it. I paid off my seven loans. The moment I no longer had student debt, certain aspects of my life began to calm down. Aside from logging into my account to download a tax form, I never thought about this debt again.
This is a radical shift from when I was in debt. I remember what it was like to live with loans. It was all-encompassing. The nights were sleepless, the phone calls from my servicer were nonstop and my stomach perpetually hurt.
I know the reasons why people don’t like the concept of student loan forgiveness. Here are some common reasons I hear often:
- I had to pay for my loans, so everyone else should too.
- People are lazy. They just don’t want to do the work of paying off debt.
- You shouldn’t go to an expensive school or take a loan for one if you can’t pay it back.
- If we forgive student loan debt, what’s next? Where do we draw the line?
I’ve read all the reasons why it’s hard to forgive student debt. In return, I wonder if anyone ever considers the mental and physical toll of this debt. I wonder how many people realize student debt is no longer debt impacting young graduates, but many generations across the United States who are aging into student debt.
Aging into debt, rather than out of it, presents a series of challenges to people whether you know them personally or not.
It makes it harder to save for retirement, stretches already thin budgets, harms credit and increases the wealth gap. The longer one remains in student debt, the longer it takes to get out of it. Many may even come to believe they may never be free of debt and resign themselves to the idea of a lifetime of financial struggle.
Could Student Loan Forgiveness Benefit the Economy?
The answer to this question is yes, both for the economy and the borrower.
In a 2022 Fortune article about how wiping out student debt would impact the economy, Adam Looney, a nonresident senior fellow at Brookings, said people who go to college and graduate from college are often in better economic and financial shape. They have a better education and earn more income. A student loan borrower, someone who has graduated from college and received a degree in their given field, will do well throughout their career because they worked to receive a higher education.
The economic impact of student loan relief would vary depending on a few factors. Fortune reports it would depend on the amount of relief provided and whom it targets. However much relief is afforded, however, could act in the short-term as a stimulus to economic activity.
In the long-term, it could lead to improved credit, an increase in homeownership, and the ability to start a business or start a family. Countless Americans could finally experience financial freedom on their own terms — with even a slight bump of forgiveness.
At the time of writing this piece, there are a couple weeks left before the pause is lifted on federal student loan repayments on August 31. It’s difficult to know if another pause may be announced or if the United States may ever experience widespread student loan debt forgiveness.
However, while it is critical for borrowers to begin ramping up plans for repaying debt, or what they may need to do to refinance or consolidate federal or private loans, no borrower should ever regret obtaining a higher education. Even if they carry some debt on the other side, this is a degree you earned through hard work and perseverance and nobody can take it away from you.
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