I don’t know if anyone in power will take these recommendations seriously, but a headline like this is probably music to the ears of the millions of people out there are struggling to pay off their student loans.
Although different politicians have different ideas and plans about how much student loan debt they would forgive (or not), economists say that forgiving student debt could boost the economy in huge ways while also fighting income inequality.
Economists argue that the debt forgiveness could boost the economy because so many Americans are limiting their life decisions based on their student loans.
"In the short term, it would be very positive for the housing market," says NAR's Lawrence Yun. He's not endorsing any particular plan, but he estimates that broad loan forgiveness would push up the number of home sales quite a bit. #StudentLoanDebt https://t.co/02DqVUYNW7
— REALTOR® Party (@NARRealtorParty) November 25, 2019
A prime example is Laura Greenwood, 30, of Montpelier, Vermont. Greenwood works for the state education agency in Vermont, making $63,000 a year. She said, “I make probably a better salary than a lot of my peers.” But, she added about a major life decision, “Children, it’s not about if you want them. It’s about can you afford them?”
Greenwood said she owes $96,000 in student loans for college and graduate school. She admits that this is a major hindrance to the decision to have kids with her partner. She said, “We’re interested in having kids, but just cost of living and all our other bills and then the student loans, it’s just like the final straw.”
Greenwood added that her debt makes the possibility of having children seem impossible.
Economists argue that if people like Greenwood and others saddled with debt had that anchor removed, more of them would buy houses, have kids, and start businesses.
Lawrence Yun, the National Association of Realtors chief economist, said, “In the short term, it would be very positive for the housing market. Home sales could be, say, 300,000 higher annually if people were not saddled with large student debt.” According to Yun, this would be “a boost to the housing sector as well as the economy.”
William Foster, a vice president with Moody’s, said about total loan forgiveness, “There’ve been some estimates that U.S. real GDP could be boosted on average by $86 billion to $108 billion per year.” He also said, “Student loans are now contributing to what’s perceived as lower economic prospects for younger Americans.”
On the flip side of those seemingly encouraging statements is the fact that loan debt forgiveness would be expensive. Foster said the total for student loan debt is about $1.5 trillion – which is why it’s such a drain on the economy. He claims the federal government would have to give up $85 billion in annual revenue that it collects from these loans, which would result in a wider fiscal deficit (not that it seems to matter these days).
What do you think about this controversial and divisive topic? Should student debt loan be forgiven? Or partially forgiven? Or do you think that these former students need to pay in full?
Let us know what you think in the comments.
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