Introduction
Student loans are particular types of funding offered to students to help them in their post-secondary education. The loans are meant to ensure that the students pay the tuition fees, books, and other living expenses while in the institutions of higher learning. Any person above eighteen in the USA qualifies for private loans. Over 42.8 million American students depend on the loan board to fund their higher education (Brint 23). As of 2022, over 10 million student borrowers owed loans between $20,000 and $40,000 (Brint 27). The board’s sustainability is achieved when the people can pay back their loans.
Offsetting the student’s loans by the federal government without an appropriate framework is likely to affect the sustainability of the loan system. Joe Biden, the President of the United States of America, proposes a waiver to forgive student loans to help them achieve better economic outcomes (Blest 3). According to him, the loan forgiveness is likely to offer an effective economic for the students to thrive. However, the proposal is likely to jeopardize the system’s sustainability and deny future students the loan.
Negative Implications of Loan Forgiveness
Despite the naysayers claiming that loan forgiveness will likely grow the economy and benefit the said student, the system’s sustainability will be in jeopardy. Further, student loans portray racial inequality and must be rectified through forgiveness. However, there are numerous disadvantages associated with forgiveness which are likely to affect the sustainability of the loans to the students. The most common disadvantages include the action being an abuse of the system and becoming more beneficial to the rich (Blest 6). Further, the action is a temporary solution leading to inflated college costs. Finally, the action is likely to result in more expenses in government spending which may derail development in other sectors of the economy.
Unsustainable Loan System
The student loan system thrives only when students repay their loans. The interest rate may be used to invest in real estate to increase the funding source. When all the students repay their loans, the institution grows and can offer services to other needy students. However, the forgiveness of the loans, as proposed by the president, will likely jeopardize the system’s sustainability. The standard payment time for the loans is ten years, but special arrangements can be made to be paid up to thirty years. When there are special arrangements to repay the loans, the other students will also likely benefit from the system (Amin 186). Forgiveness of the loans, therefore, makes it impossible for the system to be sustainable and deserving students may not be in a position to benefit from the loans (Charron-Chenier et al. 15). Loan forgiveness will make the loan board rely on government spending for sustainability. Since government spending goes through numerous bureaucracies, it may lead to delays, affecting the government’s role in providing affordable university education.
Abuse of the Loans System and Offering Temporary Solutions
A survey conducted USA showed that people are expected to be responsible for the economic choices they make. 46% of the respondents believed that the government must empower students to repay their loans (Charron-Chénier 5). Forgiveness is an abuse of the system and promotes irresponsibility in the discourse. The current crisis in the USA is experienced despite forgiveness in the previous regimes. Since forgiveness is not an economic policy to help the students raise funds, it cannot help to solve the challenges in the corporate American economic system. The total debt owed in the country is over $1.7 trillion, which can change the economy through investment (Mark 16). However, when the loans are forgiven, and the government has no way of raising the money, it is because of a future problem for the needy students who will need the loan. However, the options for forgiveness must be analyzed to ensure that it does not cause future challenges.
Inflated College Expenses
Writing off the loans will have a ripple effect on the college fees and other amenities in the institutions of higher learning. Since the primary source of revenue for the government tax, the government is likely to tax its citizens more for the wealth to be acquired. Further, when the loans are forgiven, the millions of students whose loans have been forgiven will feel more affluent and therefore increase their spending (Brint 25). Consequently, inflation will increase the price of products and college fees. The inflated college expenses are likely to have a ripple effect on the quality of life since it affects the ability of students to take care of their needs (Charron-Chénier 5). Once the loan system is no longer available to offer loans to students, some may drop out of college due to failure to pay for tuition and other expenses. Therefore, inflated college fees and expenses are likely to discourage students from humble backgrounds from attaining better academic outcomes (Miller et al. 18). The education level in the country is likely to be affected and deserving student may lack the necessary funds to pursue their education.
Increased Government Spending
The US government spending is channeled towards corporate subsidy and ensuring that the citizens have the essential commodities. When the president orders to cancel of student debts through federal forgiveness, the government will incur the costs (Brint 190). The US government spends over $170 billion on various subsidies and other aids. Offsetting the student loan of $1.7 trillion is likely to hike government spending (Charron-Chenier et al. 24). Consequently, other sectors of the economy will be deprived of resources, and other development projects may stall. The government should instead use the money meant to offset the debt to empower them economically. When the loan forgiveness plan is implemented, the amount of government spending will deprive other development issues. Increased government spending is detrimental to the economy and may lead to a deteriorated standard of living (Miller 54). It is imperative to note further that increased government spending is likely to increase inflation, which will likely affect the economy’s purchasing power. Student loan forgiveness must be discouraged because it will harm the economy through unprecedented inflation.
More Beneficial to the Rich
Racial and economic disparity is part of the most common challenges in the USA. Since the government advocates for equality in the provision of services to the community, loan forgiveness is likely to manifest more discrimination. When more whites are forgiven than the blacks, the economic discrepancies in the country increases (Russell 44). Most of the benefits that are likely to be accrued by the former students will benefit the rich more than the poor (Amin 196). The action will likely increase the gap between the rich and the poor, which will affect the economy negatively. The proposal by the president is therefore likely to be one of the factors that may jeopardize national unity and affect people’s quality of life.
Conclusion
The student loan forgiveness debate has taken a different turn in the USA after lawmakers realized the long-term effect in the USA. President Biden’s proposal has been met with resistance from some members of congress because the action is likely to affect the sustainability of the loan board and the education requirement. Therefore, the government must analyze the negative impacts of the forgiveness option and revise it to ensure sustainability in the discourse. The disadvantages of the policy outweigh the advantages, and the government must refrain from proposing to forgive students of their loans. Numerous options can be exploited to ensure that the forgiveness of student loans does not jeopardize the economy.
Works Cited
Amin, Kunal A., et al. “Investigating the impact of student loan debt on new practitioners.” Journal of the American Pharmacists Association 61.2 2021: 191–197.
Blest, Paul. “Biden paused student loan payments again as the GOP tries to make students pay.” Vice.Com, Web.
Brint, Steven. “Challenges for higher education in the United States: The cost problem and a comparison of remedies.” European Journal of Education 57.2 2022: 181–198.
Charron-ChĂ©nier, RaphaĂ«l, et al. “A pathway to racial equity: student debt cancellation policy designs.” Social currents 9.1 (2022): 4-24.
Charron-Chenier, RaphaĂ«l, et al. “Student debt forgiveness options: Implications for policy and racial equity.” New York: Roosevelt Institute 2020.
Mark, Colin. “May the Executive Branch Forgive Student Loan Debt Without Further Congressional Action?.” Journal of the National Association of Administrative Law Judiciary, Spring 2022.
Miller, Ben, et al. “Addressing the $1.5 trillion in federal student loan debt.” 2019.
Russell, Lauren. “Effects of the Federal Teacher Loan Forgiveness Program on School-Level Outcomes.” 2020.