One of the problems inherent in all public policy discussions is the degree to which various aspects of our communal lives are connected–and the even greater degree to which those connections are unseen and/or under-appreciated.

As an example, a recent study from the Brookings Institution detailed the multiple ways in which student loan debt affects Americans, and illustrates the way lack of understanding of those connections distorts discussion of proposals to forgive at least some portion of it.

There is one element of student debt that is widely understood, of course–its size. In the last quarter of 2020, the Federal Reserve calculated the national student debt at $1.7 trillion, spread across 45 million borrowers. That is a monumental amount, and a monumental burden on both the borrowers and the economy.

Research suggests that forgiveness of some or all of that burden would prompt a variety of economically consequential behaviors–everything from eating out more frequently to  making large purchases that the level of debt currently doesn’t permit: houses, cars, appliances and furnishings. Respondents to one survey also cited returning to school, and saving more for emergencies.

In a study cited by Brookings,

Higher amounts of student debt forgiveness were associated with other investment behaviors like starting a business or savings for a down payment on a home, as well as a willingness to spend more on entertainment….

These results [of the study cited] show two things. First, they show how extensively student debt affects debt holders. The responses to this experiment indicate that student debt is strongly influencing decisions that can have large implications for household economic stability (e.g., emergency savings) and mobility (e.g., saving for a down payment on a home, starting a business). In addition, student debt may be altering the structure of families themselves. Roughly 7 percent of respondents reported that they would be more likely to get married (results not shown) or have children if their student debt were forgiven, indicating that this debt burden is affecting even fundamental decisions about debt holders’ life trajectories.

Second, these results show that the level of student debt forgiveness matters. In particular, setting a student debt forgiveness target too low may not lead to broad-based changes in households’ economic behaviors. However, setting a student debt forgiveness amount at a point where the average debt holder would have more than a quarter of their debt forgiven may yield large changes in savings behaviors, human capital investments (e.g., returning to school), and business starts, without leading to large changes in labor supply.

It is undisputed that even a modest amount of debt forgiveness would remove what is currently a large drag on the economy. There are, obviously, other considerations: many people who have dutifully paid off their loans object to what they see as unfairness of giving later-comers relief that was unavailable to them. Others argue that any forgiveness should prioritize low-income borrowers, and avoid “bailing out” higher income folks.

Going forward, my own preference would be to replace the current, complicated student loan environment with a program that pays for at least two years of college in return for a year or two of military or civic service (a la Americorp).

Whatever the policy approach, we need to recognize that debt of 1.7 trillion dollars constitutes an enormous drag on Amreica’s economic growth. It isn’t simply an impediment to business formation–it prevents many individuals from taking lower-paying but gratifying jobs in the nonprofit sector– and it is a significant fiscal and psychic burden to individuals. It has become unsupportable.


  1. Excellent ideas. I would support a version of “all of the above”. It seems to me the best of all is the idea of forgiving some debt in exchange for public service of one kind or another. That accomplishes two things; it lowers debt for students and it brings people into contact with those that otherwise may never have come together.
    I would also like to see a graduated approach to student debt forgiveness, forgiving a larger percentage of debt for those whose families are less fortunate economically and a smaller percentage for those in the richer levels of society.

  2. How about paying graduates a living wage along with your suggestions. Getting a degree does not guarantee someone a job in their field of study either. We need actual job training for jobs that exist and are allocated to those students. I didn’t get a teaching degree because a 4 year degree was required and starting pay was too low!

    We need to stop giving corporations educated skilled adults and paying them with slave wages. How can you justify the expensive experience?

  3. Once again, who could possibly oppose canceling student loan debt considering the cost of an education including inflated textbooks?

    Aside from the individual, the oligarchy and society reap monumental benefits from an educated workforce. Look at worker productivity over the years. It has grown significantly due to a highly skilled workforce and technology.

    Too bad salaries haven’t grown along with our productivity. The ones who’ve been reaping the benefits are executives, CEOs, and owners. Call it reparations for wage theft if you need to legitimize or justify it.

    Biden won’t do it though. It’s another campaign promise he’ll renege on and blame the GOP because the owners don’t want to forgive student debt just like they don’t want us to have universal healthcare. That would give us too much freedom or they’d lose control which is what they want.

    This is how decisions are made and why they are nonsensical. It’s why the DNC-backed candidates always promise progressives things to get their votes and then screw them over. If progressives stop voting, we’ll get another Trump. This plays right into the identity politics of the DNC because women and people of color will get screwed.

    Notice how they are transitioning from racism into abortion again when they are screwing workers and students. The owners have been manipulating the masses from the beginning with the help of their media. Soon, you’ll forget all about the coup attempt and forcing workers back into the hands of the poverty exploiters.

    Those who ask why we have so much propaganda — because it’s effective in dividing the classes back into their capture two-parties. It’s herding time, folks. 😉

  4. Our son-in-law just had the balance of his medical school student loans, which were substantive, forgiven in a program initiated during the Obama administration. To obtain this he had to 1) apply for it, 2) upon graduation commit to work for a community-based non-profit healthcare organization for ten years, 3) keep track of every monthly payment on the USDoE website to be sure it was credited, and when it was not, call the USDoE to correct the error, 4) apply (again) for forgiveness once qualified. This required significant diligence on his part because DOE under former Secretary DeVos did everything they could to throw stop-sticks in the road to prevent students from using the program or successfully completing it.

    About a month ago our daughter and son-in-law broke ground for a beautiful, and quite large, new home. The monthly mortgage , insurance, HOA fees and taxes will still be more than $1,000 less per month than his student loan payment. Such is the draining economic impact of student debt – imagine the impact of $1.7 Trillion nationally.

    What I find profoundly stupefying is how many people I’ve met whose children qualify for this program but never heard of it or didn’t bother to apply for it (it’s currently open to healthcare and teaching professions, I think). Part of that is the fault of USDOE and college financial aid departments but a lot of it has to do with people not paying attention and not taking personal responsibility for doing the work of finding out how stuff works. So, no, I’m not in the least bit sympathetic for a program that provides carte blanche forgiveness of student debt.

    What makes far more sense is to pass enabling legislation that allows students to refinance their loans at current historically low interest rates, exactly the way the mortgage industry works. This would have the effect of “forgiving” a significant share of the actual cost of repaying the loan – or as much as 50% or more. The feds could even subsidize the transaction costs of refinancing so the impact on the former student is minimized and is affordable across the income spectrum.

    There’s only one thing standing in the way of such a program: the massive financial services industry and its K Street lobbyists. Today the laws are specifically fixed to ALLOW student loan contracts to forbid refinancing and as a result many student loans are financed at rates as high as 7% at a time when you can get a 30-year mortgage at 2.85%. So, that $1.7 Trillion balance that we’d like to see go away? The only way it ever will in our current corrupt crony-capitalist oligarchy is to make sure that the interest due on all that debt is given to the banks no matter what else happens.

  5. Sadly, a lot of folks refuse to think thru the benefits of forgiveness, again fears a few cents of tax dollars may not benefit them directly, while others are of the “ I paid mine they have to suffer like I did “ mind.

  6. Patrick Wiltshire – that program is also available to people working for the government in general. I am also surprised by how many folks who work in government haven’t heard of it.

    Fun fact about the program, if you were to consolidate your loans to simplify your payments (as recommended by DOE), you will lose what credit you have built up towards forgiveness. You see, your consolidated loan is a NEW loan and not the original loan you were earning credit for. So, start your 10 years over again.

    Ask me how I know…

  7. As shown by comments today already, this is not a simple issue with a “silver bullet” solution – “forgiveness”. We shouldn’t “forgive” the unjustifiable high costs of many colleges, the high interest rates charged for loans, the for profit schools that relate to lots of the loans, the poor education of students about what they are getting into, etc.

    The ideas for reducing costs in return for public service work is worthy. And forgiving any part of loans to the “richer parts of our society” – why?

    And, yes, it would be great to enable folks to start families. But so they can eat out more often?? How do you think poor folks would react to that?

  8. Okay… let’s look at this word “forgiveness” – because that’s not really what’s going on here. What we are talking about is transferring the responsibility to repay those loans from the individual who incurred the debt over to the general public. Nobody is waving a magic wand and making anything disappear. Let’s dispense with the magical thinking. Part of any adult’s “real-life education” is that things aren’t “free” and tough decisions have to be made.

    So, do those same studies that show “the burden on the economy” also analyze what happens when John and Jane Q public are now on the hook for $1.7 trillion? Using their same logic, it also means that everyone else would have less to spend on “eating out, houses, cars, appliances, and furnishings”.

    Don’t get me wrong, I think that the student loan situation is terrible. Young people should not start adulthood with crippling amounts of debt. It’s a terrible decision from a personal finance perspective.

    Similar to health insurance in this country, the way that higher education is paid-for disconnects the education consumer from the costs of his/her decisions at the time they are happening. This encourages poor value-decisions (am I really getting a good education for this money). It also has allowed the cost of higher-ed to skyrocket. What’s more, a significant amount of “lifestyle” is financed on these student loans. Not only do I resent paying for someone else’s education, I particularly resent paying for bad value-decisions, big sports stadiums and athletic programs, drunken parties, fancy dorms, kids who don’t attend class, etc.

    I believe society has a legitimate interest in educating young people beyond the 12th grade. I also believe it’s important to “build a ladder” to help people to escape poverty. To that end, two years of community college should be mostly free (tuition and books) and the credits should transfer to a state institution or a formal trade apprenticeship program. If the federal government is going to be involved in student loans at all, it should be capped at $20-30k or so for a four-year degree (since the public is already paying for the first 2 years).

  9. My wife and I have paid off our student loans. So what? Not offering forgiveness because it’s unfair to us is like not giving people a vaccine because it’s not fair to those that have already had the disease (both those that recovered and those that didn’t). In other words, it’s a ludicrous argument.

    Also, I notice the quoted bits of the article don’t mention mental health explicitly, and don’t note that many loan holders owe more–sometimes much more–now than they did when finishing school. Just more reasons to proceed with alacrity.

    You also don’t means-test it. If you do this, you will need to draw a line somewhere, or perhaps offer a descending level of forgiveness, which will hurt some more than others. And, means-testing it just costs more money to implement, increasing the overall cost unnecessarily. Overall, it’s just another “fairness” argument, which I’ve already repeatedly noted, is a terrible one.

    When you have the opportunity to reduce the misery of people, you just take it. And, in this case, it offers a ton of really important societal benefits.

  10. We all know that student debt negatively affects housing starts, marriages, etc., and that such principals at interest divert monies to financiers that could otherwise be used to goose aggregate demand to the benefit of all of us. So what are we going to do about it?

    Corporate America has been on the gravy train long enough with its free use of the educated labor taxpayers and students finance; it’s time they got into the act. Here is what I suggest: That we leave the present system intact (with some changes in bankruptcy treatment and refinancing at mortgage rates, like the corporate mortgage bundlers do) but with the following additions > That students with tuition debt receive a tax credit on a twenty year graduated basis (e.g., a hundred thousand dollar debt would earn a five thousand dollar credit per annum); that those students who have already paid their loans receive the same treatment but that their entire debt paid be immediately available for the credit on a carryover basis year to year.

    How to pay for this? Adopt a new corporate tax apportioned on the anticipated year to year costs of the program, amended year to year with experience. Won’t work? Tell me how the present system of corporate welfare is working for you, me, students and our economy.

  11. Greed rules! Sloth is greed’s companion!

    Nonfinancial institutions are sitting on close to $3 trillion of liquid cash! This Continues to skyrocket because of the massive tax cuts Republicans gifted to corporate America.

    Significantly over $8000 for every man woman and child in the United States.

    These ill-gotten gains should be liberated to pay off student debts and medical expenses. And, this money should be tapped continuously for educational and environmental services. TWO-year cost free college? Make it FOUR-year cost free college! To go along with that, cost free healthcare!

    That money would be pumped back into the economy and create a boom of home purchases, building, a massive increase in intellectual production as a result of higher education. It would lead to more scientific discoveries and technologies that are on the horizon but are not being fed through the system.

    But alas, there are too many trees to see the forest. These things need to be accomplished quickly before man digs his grave completely. Man is pretty close to getting down to depth already, and once the grave is complete there’s no turning back!

    Is going to take a unique situation to make these things happen. A situation that has not happened in the United States on behalf of of the people. We’re well aware of corporate welfare, and the wealthy socking it away while people stand food lines! And what’s going to happen when that food is not available anymore? That’s the whole point of having an educated citizenry, it’s impossible for the lies to be successful if visible and empirical evidence, via education, is available!

    There really needs to be penalties for those individuals out there spreading lies and innuendo, conspiracies and false narratives, to stir up unrest amongst the most feebleminded or hateful in our society. Accountability has to be job one. An elected official has accountability TO THOSE WHO elected them.

    If those folks that the elected officials govern feel like slaves, they will never ever break the yoke of subjugation, the yoke of despair! Remember, every person has freedom of choice or free will, so everyone is free to live a subjugated life or a free life. After all, the political realm is at the beck and call of the citizenry. And if the citizenry is not satisfied, change will be afoot. But this takes effort, and it takes critical thinking! And I fear way too many are just too lazy.

    Using the term cheʹdheq, Proverbs 15:19 likens the path of the lazy man to a brier hedge, apparently in the sense of his envisioning or imagining difficulties and thorny problems in every possible undertaking, and on that basis excusing himself from moving ahead.

  12. The “free market” economy is obviously not free for people who wish to go to college or those who need health care.

    Hospitals used to offer payment for nurses with an associate degree who wanted to get a bachelors degree in nursing. You had to work at the hospital for 5 years or so after they paid for your bachelors degree. I doubt that those programs still exist thanks to the free market in health care whose CEO’s benefit but not the hospital staff.

    There is no doubt that student college loans have a marked impact on our economy and the life trajectories of college graduates.

    I think the idea of having people work for public service after receiving a college education is a great idea. What if they worked on infrastructure or in a conservation corps? What if they planted trees in 3rd world countries around the equator or in California? What if they removed fire catching brush in California? We could benefit greatly from such a program.

    I wonder if due to global warming, young adults will move more toward voluntary simplicity or a minimalist life style. This could mean that neighbors will start sharing tools and that people will spend less on entertainment. Perhaps they will live more communally than we do in this highly individualistic culture. i.e. getting together for dinner at home, playing badminton in the back yard, playing board games together. Oh no, that sounds like what my parents did in the 50’s. and 60’s. Hopefully, the gatherings would have much more diversity in future generations.

  13. How about tackling the built-in problem of college costs that increase at twice the rate of inflation and have done so for decades. If we don’t address this reality, most universities will charge more than $100K (total cost) in just a few short years and there will be a need for multiple rounds of student loan repayments into infinity. Only the already elite need apply. My top ten college cost $450 per semester in the 1950s. Since I graduated it has acquired, among others, a lemur institute, a global health institute, a brain science institute, a social science institute, a human vaccine institute, a molecular physiology institute and others. It also competes nationally at a high level in sports. It’s not clear to me how these impact costs, but there appear to be many opportunities to keep costs in line through focusing on the mission of universities – educating undergraduates. Part of government’s role should be to incentivize schools to keep a lid on tuition, etc., if we want to remain in the forefront of well educated countries with opportunities for children with good minds whose parents lack resources.

    If universities are not stepping stones for upward mobility, what is?

  14. I started College in 1980 and I paid $25 a credit hour to go to IUPUI. By the time I graduated in 1988 (I was working full time by then), it was $125 a credit hour. Today it looks like it is about $300 credit hour for under-grad courses, but that does not include the cost of books either. I was lucky to be able to pay as I went, and the company I worked for would pay 50% toward my degree as long as I kept a “B” average.

    I know higher education is a lot like healthcare when it comes to the economics. It requires a certain number of people and a certain level of facilities to make it worthwhile for the student or patient. So I don’t know how to make higher education more affordable, but if the country and society think this is something important to the betterment of the country, there should be more support from society as a whole.

    I had a co-worker that was in his later 20’s and had $50+K in debt, and was struggling with it. It was like anchor on his financial life. Just like the study said, he was delaying marriage and home buying until he could get out from some of the debt.

    The whole student loan thing is somewhat a trap and it exists in it’s current form because there are players that are making a lot of money. The whole system is financially crushing a group of people who would otherwise be out there growing the economy.

  15. As usual, Todd E Smekens nails it. Until real progressives have positions of power (and that probably won’t happen in my lifetime), nothing will change. Right now we’re on a path for the Republicans to retake the House and Senate in 2022. Pelosi et al barely managed to hang on to a majority in the House and Schumer barely won the Senate, while the polls in 2020 predicted healthy gains in both chambers. Nothing was learned. It’s business as usual. Promises were made, but the donors determine which can be fulfilled.

  16. Educating citizens is in the best economic interests of our country. When I left college I had $1,500 in residual debt related to school. If the debt had been 15,000 or more I would not have had the freedom to pursuit the entrepreneurial avenues I have. I would have been forced to work for some corporation until that debt was paid.
    Now, it is my opinion that corporations and the people who run them don’t want free people, even if it is better for the economy overall. Keeping people in debt bondage is better than slavery.

  17. Some of the problems with the government-backed student loan program are: 1. the debt is, for all practical purposes, not dischargable in bankruptcy, absent proof of hardship, which DeVos demanded be strictly construed. Even having cancer and a poor prognosis, and not being able to work do not, according to DeVos, constitute hardship. She also refused to honor the law discussed in this piece for forgiveness for working in healthcare in underprivileged areas. Non government-backed student loans (the distinct minority) ARE dischargeable like any other debt; 2. while the student is in school, the federal government pays the interest on the loan–this is guaranteed interest, which is why these debts are attractive to “investors”. The loans are bundled and sold in packages almost as soon as they close, and they are then re-sold, re-sold, on and on, so that it can be hard to keep up with where to send the payment. Proof of payments sometimes gets lost. Also, it can be hard to be certain that your payments have been properly credited; former students should keep every single bank statement, money order receipt and cancelled check until the loan is retired; 3. late fees and interest, if the paperwork so provides, can be rolled over into the principal balance, and then additional interest can be charged on the higher balance. People wonder sometimes how a $2,000 debt can balloon into $20,000 in a few years’ time. This is how; 4. when the student loans are federally-guaranteed, the owner of the loan can send a form to the IRS claiming the loan is in default and capture the former student’s tax refund. This can go on ad infinitum. Of course, the refund is applied first to the new late fees and additional interest, so that the principal balance never goes down and keeps rolling over; 5. unlike other kinds of loans, federal guaranteed student loans contain NO statute of limitation for enforcement. The only way out is to die; at least they can’t come after your kids after you die; 6. parents and grandparents are often encouraged to be co-signers for such loans. This is a mistake, because if the loan goes into default, the holder of the loan will go after the parents and grandparents if they are solvent, including trying to force them to sell their home; 7. the worst thing of all is those students who go to unaccredited schools, like nursing schools, for example. These people are often adults who did not go to college after high school, so they don’t have a guidance counselor to advise them that for-profit unaccredited programs do not qualify the student to sit for licensure examinations. After getting a taste of the real world, these people want to do better, but maybe they can’t get into a regular university. The for-profit schools will take them. So, if someone went to an unaccredited nursing program and runs up a huge student loan debt, that person must pay back the loan but still can never become a registered nurse. The “credits” from these institutions don’t transfer to accredited schools, either for lots of valid reasons–like teaching staff not having sufficient education or experience. The Obama Administration issued an Executive Order that loans from unaccredited schools would not be enforceable. Unsurprisingly, DeVos reversed that rule.

  18. @John Sorg,

    It’s very easy to spend other people’s money – and call them greedy when they disagree.

    Everyone here who is advocating for this should ask how much of their own money they are willing to contribute. If paying for that $1.7 trillion wasn’t exactly your plan – then you need to re-think this. There is no magic “forgiveness” wand.

    Society has an interest in educated adults, as does businesses. But much of the benefit of education accrues to the individual in the form of a larger salary and quality of life. Two years of community college (low cost, no frills) is a reasonable public investment.

    I absolutely understand and agree that $50-100k in debt in your 20’s is crazy and crippling.
    I know we are asking “kids” to make a major financial decision without life experience to know that $50k in debt is crazy stupid. You won’t get an argument from me about that.

    But here’s a hot tip: If you don’t have the money, don’t do it.
    Find cheaper alternatives. Go to a state school. Go locally and live with Mom and Dad. Do your first two years at a community college. Go part time and work part time. Get in – and get out (don’t change your major, don’t fail classes, stay focused).

  19. Ah, where to begin – I am older and was lucky – college was cheap when I went to undergraduate and I received free tuition and stipends for both my masters and my doctorate.

    I also pay taxes to support public education, although I don’t have children. Yes, I feel that spreading the cost over the entire populace is a good idea. We already cheated these students with bad laws and lack of support of higher education, leading to skyrocketing tuition.

    As for means testing – (1) it is expensive to administer and a pain for the recipient to come up with the paper work, (2) resentment against the “rich” really turns peoples lives into a number and doesn’t take into account a myriad of factors, and (3) on the flip side, this would then become “giving more money to those undeserving poor – the other” and of course, the amounts would get cut and burdens added like constant drug testing, paperwork filings, etc. — those undeserving freeloaders.

    Going forward, I like Sheila’s idea and using that for loan forgiveness buyback (pay for levels of forgiveness with work) is another possibility.

    I do remember when my dissertation advisor (who was first and foremost a teacher of medical students) opined that medical care would soon be more equitable distributed because tuition would become so high that almost every student would need to sign deals to work in under-served areas to pay for school. I don’t think that has happened yet; we shall see.

  20. Law and order begin with social stability, not police guns and beatings.

    I assume that some others here have been fortunate as I have to travel in unfortunate countries from which the wealth created by their labor and resources is siphoned off because they have the unfortunate history of being colonies.

    Of course, that started off as our fate too but braver people than we ended it early in our history. What followed were many decades of growing prosperity siphoned off only by a few so-called robber barons. Because we mostly came from European stock used to aristocracy we tolerated that theft and envied the barons their good fortune.

    Now we have reached a stage of inequity where the comfort of the beyond wealthy is obvious to the segment of society that lives in poverty, what was progress has morphed into social instability and the accompanying fall of law and order. In the still autocratic countries like Russia and North Korea, we see laws enforced by police guns and beating but at least act like it’s different here when it isn’t.

    This is a present condition like the future condition we are also creating by dumping gigatons of fossil fuels from underground sequestration into the sky after removing only some of the energy they contain.

    As usual, we have met the enemy and he is us.

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