Obtaining higher education is essential in the lives of many individuals worldwide. More people are enrolling in higher education institutions to achieve their goals in life, such as getting a promising career and a better lifestyle. Although many thirsts for knowledge, higher education is costly, leading to borrowing students’ loans to facilitate learning and personal maintenance at school. After college, paying the debt becomes an issue, leading to colossal government and private sector debts. The inability to repay the loans arises from numerous factors, such as the global rise in economies that raised the living cost. Regardless of the factors that led to borrowing, individuals owe a high debt of student loans but face challenges in repaying. Thus, debates on whether the loan should be eliminated and borrowers forgiven is an ongoing topic that needs an analysis of the issue’s advantages and disadvantages and a better solution. Therefore, this essay discusses the pros and cons of eliminating loans and forgiving borrowers, which can help in the decision-making process regarding the crisis.
Eliminating student loans and forgiving debtors will relieve millions of people nationwide and improve people’s living standards. The crisis affects a majority of households and families, particularly those from minority groups, low-class backgrounds and old adults. Apart from being a national crisis, the issue is a multi-generational problem where most debtors belong to generation X and Baby Boomers, whose loan has accumulated over the years due to late repayments. Statistics show that generation X has the highest debt loan at $ 39800, followed closely by baby boomers at $36200, while generation Z ranks last at a debt of $ 11800 poverty (Looney & Yannelis 138). Older adults are incapable of accumulating wealth leading to generational. Charron-Chénier et al. state that “student loan debt is holding back tens of millions of people across this country who can’t buy homes, buy cars, or start small businesses” (18). Thus, forgiving student loans will enhance older people’s lifestyles, impacting their future generations to be financially stable. Additionally, the younger generation is the fastest-growing borrower of student loans to attain higher education and secure better living. Although the students borrow loans with a certainty of repaying once they enter the job market, some of the borrowers drop out of school due to various reasons, including financial inadequacies leading to unemployment and challenges repaying the loans (Haneman 197). Consequently, students who graduate school face hardships repaying the loan because of economic strain and the high cost of living. For instance, people from poverty-stricken backgrounds need more financial resources for sustenance and improving their lifestyles hence have difficulties balancing and paying off their loans (Haneman 199). Uplifting the debt burden on these populations will relieve millions as they can redirect the finances to better living, housing, healthcare and wealth accumulation. On the other hand, a significant population of borrowers has the resources to repay the loans since loan debts are a nationwide crisis. Borrowers who complete school and get better employment a high income, own homes and belong to affluent backgrounds that are economically stable to repay the loans. For instance, Looney states that “people who go to college and graduate from college are often in much better economic and financial shape than everybody else” and forgiving them would be an injustice (Looney & Yannelis 142). Further, most loans fund students pursuing graduate degrees in professional programs such as medicine, teaching and law and have a broader job market and high earnings, which provides a means of repaying the debt. Statistics show that only 7% of the debtors live below the poverty line, which means more than 90% of the population can repay the full instalment (Dynarski 89). Therefore, the loan debt burden varies significantly among the affected populations and eliminating or forgiving all across the board will favor the privileged society and increase the economic and social status gap.
Eliminating student loans could positively impact the country’s economic system. The action can boost the economy through financial stimuli essential in building or recovering economic lapses. For example, Looney & Yannelis estimate that canceling students’ debts would cost an average of $ 1.6 trillion, while covering a debt worth $10,000 will cost 373 billion dollars (140). According to the statistics, settling the debt will transfer wealth to revenue leading to an economic boost. Further research shows that eliminating the loans would increase the gross domestic product (GDP) by billions since the action will create more employment opportunities (Dynarski 91). Employing more citizens means more earnings and revenue, which improves the economy. Consequently, elimination and forgiveness will lead to financial stability, particularly among low-income earners and minority groups who face the biggest challenge of repaying the debt (Charron-Chénier et al. 16). Thus, forgiveness helps all citizens earn a living without undue expenses, which cause financial strain and drag down the nation’s economy. Despite the positive impact on the economy, eliminating and forgiving student loans could lead to financial strain on the country. A study to determine the economic effects of canceling student loans shows that forgiving the debts would increase the country’s debt burden and forfeiture of revenue annually (Dynarski 101). The federal government gives loans directly from the Treasury bond, meaning covering the debts will indebt the state rather than increase the debt stock. Forgiving borrowers is futile if one compares the long-term benefits of students who can pay the loan and the minimal economic boost from the cancellation. For instance, borrowers with the ability to repay will have more investments in the end due to the relief, while the government will strain to stabilize the economy, which is an irrational move (Looney & Yannelis 144). Therefore, forgiving borrowers is a poor decision since the positive effects are minimal and short-term.
Today, most young people attend colleges and universities to broaden their education and acquire skills and competencies for better employment, which has led to borrowing student loans. As a result, individuals owing loan debts amount to over forty-five million citizens, where most face income challenges, housing insecurity, inadequate food and nutrition and healthcare issues. The government proposal to eliminate student debts and forgive borrowers is a heated debate with pros and cons. the pros of forgiving the borrowers include boosting the economy through financial stimuli and raising peoples living conditions to end generational poverty. Although the pros seem sound, eliminating the loans risks the country’s long-term economic stability and widens the social and economic gap since the cancellation will favor individuals capable of paying the loans. Nonetheless, loan debt hinders obtaining essential things that improve one’s lifestyle, such as buying homes and wealth accumulation. Therefore, the government should find a solution to ensure the disadvantaged population benefits from the project while those capable of repayment set off their loans.
Charron-Chénier, Raphaël, et al. “A Pathway to Racial Equity: Student Debt Cancellation Policy Designs.” Social Currents, vol. 9, no. 1, 2021, pp. 4–24.
Dynarski, Susan M. “An Economist’s Perspective on Student Loans in the United States.” Human Capital Policy: Reducing Inequality, Boosting Mobility and Productivity, edited by David Neumark et al., Edward Elgar Publishing, 2021, pp. 84–102.
Haneman, Victoria J. “Intergenerational Equity, Student Loan Debt, and Taxing Rich Dead People.” Virginia Tax Review, vol. 39, no. 2, 2019, pp. 197-238.
Looney, Adam, and Yannelis, Constantine. “How Useful Are Default Rates? Borrowers with Large Balances and Student Loan Repayment.” Economics of Education Review, vol. 71, 2019, pp. 135–145.