FACT CHECK: Does Student Loan Forgiveness Solve Student Debt Problem?

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Under general economic pressure from the pandemic and with Democrats likely to win back the White House, plans to cancel student loans are being launched. Senators Chuck Schumer and Elizabeth Warren urged Joe Biden to write off $ 50,000 in debt per borrower with the stroke of a pen by extending the authority of the Higher Education Act to the Department of Education. And Biden himself has started making statements about student loan debt forgiveness.

Joe Biden announced Monday that he supports the “immediate” forgiveness of at least $ 10,000 per person in student loans, and indicated he may be prepared to forgive more. Biden added, “On top of that, as you know, I think everything from community college to doubling Pell grants to making sure we have access to free education for anyone earning less. of $ 125,000 for four years of college. ”

Mostly false or misleading. Important errors or omissions. Mostly pretend.

In every deceptive statement or policy, there is an element of truth that makes it compelling. Americans, especially those under the age of 45, truly suffer under the burden of over $ 1.6 trillion in outstanding student debt. Forty percent of student loan holders were on track to default by 2023, and those numbers don’t take into account the current economic crisis that many families are facing.

But canceling student loans doesn’t solve the root of the problem, while increased grants and free colleges make the situation worse: the cost of a college degree is far too high. We cannot find a way out of the student debt problem until we fix the college cost problem.

The price of tuition has outpaced inflation for decades, and even the cost of a public university degree has nearly tripled in the past 30 years. Add textbooks and living expenses, and it’s not uncommon for a degree to cost between $ 80,000 and $ 160,000, well beyond what the average 18-22 year old can ‘pay’ by working the evening and summer.

Unfortunately, the cancellation of student loans and the increase in scholarships are adding to the inflationary pressure on the cost of a degree. You guessed it, one of the main reasons for the rising costs is federally guaranteed student loans. More than nine in ten student loans are issued or held by the federal government today, and unlike a private bank, Uncle Sam does not assess whether a high school student is likely to repay a five- or six-figure loan. . . The “Bennet Hypothesis” – named after Reagan’s Education Secretary who first put forward the idea that easy federal loans created a cost crisis – is no longer a hypothesis. The Federal Reserve Bank of New York has found that for every subsidized taxpayer dollar a university takes, its sticker price increases by 60 cents.

Government interference in the student loan market has had other negative consequences as well. Because every high school graduate is a blank check, universities have started accepting academically under-prepared students to improve their performance. The six-year graduation rate at four-year institutions is only 60 percent, meaning that four in ten students get the grossest deal of all: student debt and no money. diploma. The increase in the number of degree holders is also impacting the number and quality of jobs available for high school graduates as more employers feel they may require a degree. for jobs that did not require one before.

As researcher Dr Neal McCluskey wrote in The not so big Society, instead of helping underprivileged students – who now represent a smaller proportion of university students than they did when loan programs began in the 1960s – ” a… to stay in place.

The student loan cancellation sounds compassionate, but it bailed out some Americans at the expense of others, while compounding the underlying problem of college costs. Instead, we should be looking to reduce student loans and restore some natural limits to the price of a degree, as well as consider alternative education funding, like revenue sharing agreements. More importantly, we need to push back the idea that a four-year college degree is always the best route to success, especially if it comes with massive student debt that can haunt post-graduate success. a student.

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