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Poorly Targeted: Student Loan Forgiveness

How much would it cost to forgive student loans?

Forgiving student loan debts is enormously expensive. Some plans have proposed waiving up to $50,000 in student debt per person and would cost upwards of $1 trillion. With such a steep price tag, the cost would use up federal resources that might be better invested in anti-poverty efforts. As Michael Petrilli writes:

Imagine the good that $1 trillion could do if invested in the neediest Americans, rather than relatively well-off college-goers. For example, a National Academies committee estimates that we could reduce child poverty by 50% with an additional investment of $90–110 billion a year in the Earned Income Tax Credit, housing vouchers and SNAP benefits.

For $1 trillion, then, we could slash child poverty in half for an entire decade. Not only would that alleviate the suffering of millions, it would also bring downstream benefits in terms of enhanced education outcomes, stronger families and less multi-generation poverty.

What student debt forgiveness programs already exist?

The federal government offers several student loan forgiveness options, including the Teacher Loan Forgiveness, the NIH Loan Repayment, and the Students to Service programs. A full list of student debt forgiveness programs can be found here.

Michael Petrilli explains why canceling student debt without asking for anything in return would wreak havoc on these existing forgiveness programs:

These encourage teachers, doctors, nurses, lawyers and others to serve in high-need areas, or young Americans to opt for public service, including the military. Many of these programs need reforms, and Biden has promised to make them. But, for example, if new teachers can have their loans forgiven no matter where they work, we’ll lose an important tool for recruiting them to urban schools, Indian reservations, and other places where they are needed most.