Student debt cancellation sparked controversy, with many arguing that it is fiscally irresponsible and unfair to those who already paid their debts in full. However, many greeted this move, and here are the main reasons why student debt cancelation might be a good idea.
Good for the economy
The U.S. Department of Education found that borrowers save around “$5 billion monthly from the temporary 0% interest rate.” Cancelation of student debt would result in “higher credit scores, greater home-buying rates, and housing stability, greater business formation, increased gross domestic product and create over 1.2 million jobs per year.”
With affordable monthly payments, people would have disposable income
Disposable income is the total amount of money you must work with for the month. Without the pressure of massive monthly payments, student debt cancelation would work for the economy in the long run because people would have more money to spend and even change the socio-economic structure for low and middle-income families.
Narrowing the racial wealth gap
Black students are more likely to borrow and spend more time paying off their student debts. Canceling even a portion of these debts would help narrow the racial wealth gap. Studies showed the cancellation would “provide more benefits to those with fewer economic resources and could play a critical role in addressing the racial wealth gap and building the Black middle class.”
Addressing the alarming debt crisis
Currently, there are over 43 million Americans with student debts, and they owe over $1.7 trillion combined. This relief would help address the crisis among students and help promote higher education. Looking at long-term benefits, the debt cancelation would provide a more capable workforce and alleviate the pressure many future and current students fear. This would open up discussions regarding education prices and rethinking the current model for student loans.
Creating healthier competition
Long-term benefits also provide a healthier competition for those who want to be part of academia. This would help students from low-income families make more sustainable decisions regarding their future. Rich children already attend pricey private schools and have Ivy League-educated tutors, so rethinking student debt would partly eliminate the notion that education is for the rich only.
Education in the U.S. compared to other countries
Since the 80s, U.S. college costs have increased by about 500 percent, and tuition and fees continue to grow. The college costs have increased about 8% annually, doubling the cost every nine years. According to the statistics released by the Organization for Economic Cooperation and Development (OECD) in 2019, the United States spends more money per student on universities than almost every other country in the developed world. The only country that spends more on higher education is Luxembourg.