Forgiving College Debt Could Boost Economy

Student debt is without doubt one of the major talking points in the Democrartoc race for the 2020 nomination and will likely continue being an issue well into the general election. While the Democrats have differing views on how to attack the problem of student debt, some economists are suggesting that eliminating the debt could boost the economy drastically. 

So far, only two candidates have proposed that the US forgive the massive $1.5 trillion debt hole in a big way. Senator Elizabeth Warren has proposed that the US shave around $50,000 off the top of everyone’s debt, while Senator Bernie Sanders has proposed eliminating student debt all together.  

While it sounds counter intuitive that any country could survive totally ignoring over a trillion dollars worth of college debt, some economists suggest that it would gift debtees with a kind of economic freedom that currently seems unimaginable. Right now the average graduate owes between $26,000 and $36,000 in student loans. In an interview with NPR, Lawrence Yun, chief economist for the National Association of Realtors noted a 2017 survey finding that student debt delays home ownership. 

"There've been some estimates that U.S. real GDP could be boosted on average by $86 billion to $108 billion per year," said William Foster, a vice president with Moody's. "That's if you had total loan forgiveness."

Still, Foster notes that loan forgiveness would take about $85 billion out of the government’s pocket every year. That money would likely be offset by new taxes on everyone. This is probably why some have suggested paying for it with a tax on the rich. That would also offset the concern that people like doctors, lawyers, and software engineers would disproportionately benefit from loan forgiveness because they already make much more money than other people who take on similar amounts of debt. 

While there are still some obvious cons, there are plenty of pros to consider for eliminating student debt as well. It remains clear is that having regular Americans take on over $1.5 trillion in student debt just so they have a shot at a job that pays enough to eat isn't helping them advance long term. If graduates weren’t saddled with loan debt many argue that it would translate into more money actually spent inside of our day to day, person to person economy.