The false promise of student loan forgiveness

With student loan deferral ending this year, there have been calls from activists and Senators Chuck Schumer and Elizabeth Warren to cancel up to $ 50,000 in student debt, possibly with an injunction shortly after Biden took office. But according to the chart below, it would be an extremely regressive wealth transfer. It shows the average debt and educational income for Americans under 35 from the Fed’s 2019 Consumer Finance Survey.

Americans with the highest levels of debt have more years of education, which tends to mean more income and wealth. Educated Americans also have higher home ownership rates. 42% of college graduates under 35 are homeowners, compared to 33% of non-graduates. This suggests that debt settlement will not result in huge spending and investment, as advocates of debt relief argue. There are better and cheaper ways to stimulate the economy.

Student debt is more of a burden for people who don’t graduate. But the government already has a program that adjusts payments based on income. This program provides facilities for those who need it, has lower costs for current and future taxpayers, and is more advanced.

Allison Schrager is a Senior Fellow at the Manhattan Institute. Follow her on Twitter here.

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