By Isabella Diez
Is taking on a lifetime of debt worth it? This is the question which many Americans are forced to consider when deciding to pursue higher education.
Student loan debt has become a crisis for many Americans. With 44.5 million borrowers as of 2020, the total owed is now $1.6 trillion in student loans.
President-elect Joe Biden has proposed a policy to cancel student loan debt. The Democratic Party endorses this plan to forgive part of the country’s student loan debt, although critics in both political parties assert that this would not benefit the economy.
There are two sides to this proposition but what are the arguments in favour of cancelling students loans as well as those against it?
Biden has indicated he may cancel student loan debt up to a maximum of $50,000 per student. This initiative would be a one-time nationwide student debt cancellation program. The hope is that this move would help to stimulate an economy heavily affected by Covid-19, and would aid in the eventual albeit long-term recovery of the country.
Individuals who have been weighed down with student debt have also had to contend with the impact of two major recessions. Many have been forced to remain in their current jobs and consequently have had their careers stalled. With these combined factors at play, numerous people have delayed starting their own business, buying a house, or starting a family. The student loan cancellation program would help alleviate financial burdens and open up professional and personal opportunities.
The program has not been without its critics. It has been argued that this plan may be unfair to individuals who have just recently paid off their student loans. For this reason, Biden’s debt forgiveness program would extend to people who have paid off their student loans recently, by providing them with a rebate.
There have also been arguments against the cancelation of student loans. More than half of those with student debt are individuals with graduate degrees in such fields as medicine, law and business. The earning potential of those with these graduate degrees is quite high. Therefore, forgiving student debt for these individuals would not make much sense.
Michael R. Strain, Bloomberg columnist and director of economic policy studies, said he would be astounded if “forgiving the student loans of high-income, highly-educated professionals resulted in any measurable increase in entrepreneurship, dynamism or economic growth.”
Forgiving student debt up to $50,000 per person is a very costly venture for the government, and many believe it would be a poor use of taxpayers’ dollars. It is estimated that this one time cancellation would cost around $1 trillion. In addition, the student debt crisis may only intensify, as some students may be tempted to take on student loans irresponsibly.
Forgiving the student debt for many individuals across the country ultimately does not address the issue of the high cost of post-secondary education in America. The cancellation of student debt may bring relief to those carrying student loans. However, is this the best approach to bring affordability to higher education?
Photo by Travis Essinger, Unsplash