Student Loan Forgiveness Is Regressive And New Research Says Only Targeted Forgiveness Works

Student Loan Forgiveness Is Regressive And New Research Says Only Targeted Forgiveness Works
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According to new research, student loan forgiveness is retroactive Only Target Student Loan Forgiveness works.

This is what you have to do.

student loans

Widespread advocates of student loan forgiveness say, among other reasons, that student loan forgiveness will help close the socioeconomic and racial wealth gap. However, according to new research from the Brookings Institution, Student loan forgiveness is regressive whether measured by income, education, or wealth.

Why widespread student loan cancellation is bad policy

Here’s what’s inside the new search:

Student loan forgiveness: Financial wealth is a poor measure

  • The author argues that a student loan borrower’s financial wealth can be misleading.
  • For example, medical school graduates may typically owe more than $100,000 in student loan debt, but that doesn’t mean they have less money than those who didn’t attend college.
  • Wealth, according to the author, “should include the value of educational investments borrowed by students.”
  • Student debt is concentrated among high-net-worth families, so broad student loan forgiveness is “an ineffective way of reducing economic gaps by race or socioeconomic status.”

(Student loan borrowers will get $15 billion from student loan cancellation.)

Student loans are expensive, but it’s not just an obligation

  • Student loans are a commitment.
  • However, student loans are borrowed to finance an asset: education, which increases earnings over a lifetime.
  • Therefore, if the liability (student loan debt) is measured, then the asset (earnings increase) must be measured as well.
  • As the author notes, it’s like establishing the homeowner’s wealth by focusing on the mortgage balance, but not the value of the home.

Is canceling student debt next?

Student loan forgiveness is retroactive

  • Student loan forgiveness and income-driven repayment plans, which must be improved, mean that student loan borrowers do not actually pay their student loans according to their student loan balance.
  • In contrast, student loan borrowers who are enrolled in an income-driven repayment plan or a student loan forgiveness plan can pay a small portion of the federal student loan balance before receiving student loan forgiveness.
  • Nearly a third of all student debt is owed by the richest 20% of households, while only 8% of student loan debt is owned by the lowest 20%.

How Your Student Loans Can Qualify For $1.7 Billion Student Loan Forgiveness

Why Target Student Loan Cancellation Is More Effective

  • President Joe Biden has canceled $12.7 billion in student loan debt. His strategy to date has been based on Targeted Student Loan Elimination, which helped grant student loan forgiveness to public officials, student loan borrowers with permanent disabilities, and student loan borrowers who were misled by their college or university through the borrower to advocate for repayment. .
  • Senate Majority Leader Chuck Schumer (D-NY) and Senator Elizabeth Warren (D-MA) disagree that targeted student loan forgiveness is the most effective policy. Democrats are pressing Biden to cancel student loans after Biden extended student loan forgiveness. (Student loan forgiveness may be the reason Democrats lost the midterm elections.)
  • Here is the need: Not everyone will qualify for student loan forgiveness. (Those who will not receive student loan forgiveness.) If there is any student loan forgiveness, it will likely be limited to only federal student loan borrowers and have an income cap. Widespread student loan forgiveness can also become a targeted student loan forgiveness and focus on low-income borrowers or borrowers in the event of student loan defaults or borrowers in the event of student loan delinquency.

Student loan forgiveness: recommendations

According to the author, the best way to “close racial and socioeconomic gaps in income and wealth” is to:

  • Tested scholarship and student loan assistance;
  • More oversight of colleges and universities offering federal student loans;
  • Income-based student loan repayment schemes that protect student loan borrowers whose education is not paying off, along with targeted student loan forgiveness for borrowers who can demonstrate that their student loans pose significant economic hardship;
  • Treat undergraduate, graduate, and professional degrees differently for student loan forgiveness; And
  • Lawmakers must decide how much the federal government plans to support higher education.

Student loan forgiveness is extended for 90 days, but it is only temporary student loan forgiveness. Make sure you have a student loan repayment plan. Understand all your options. Here are some popular strategies for paying off student loans faster:

Student loans: related reading

Those who will not get student loan forgiveness

Is canceling student debt next?

Student loan borrowers will get $15 billion from student loan cancellation

How Your Student Loans Can Qualify For $1.7 Billion Student Loan Forgiveness


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