Quote from Savings Beagle on May 11, 2022, 2:40 pm

Our political class is back to pandering for votes with the resurrection of the federal government's student debt cancellation proposal.

I could get into a long-winded discussion of how the student loan debt problem is the government's fault to begin with and how lack of financial literacy has led many to take on student loan debt which was probably unwise.  But I won't.

I will, however, put forth the idea that canceling student loan debt at this time would only contribute to the significant inflation problem we're experiencing.  And any meaningful efforts to help all Americans by curbing the sky-high inflation rates would not include measures - such as debt cancellation - that would only exacerbate the inflation problem even more.

Plus, we can't ignore the fact that canceling this debt would only add to the U.S.'s already unmanageable $30 trillion debt load.

Here are two articles on the student debt cancellation issue by the Committee for a Responsible Federal Budget.  As you can likely imagine, they're not fully on board with the proposals being bandied about, and they give pretty decent reasons why.

Debt Cancellation is Costly, Regressive, and Inflationary

"According to press reports, President Biden is seriously considering cancelling a large swath of student debt – perhaps more than the $10,000 per borrower he originally proposed during the campaign. We previously estimated that cancellation of $10,000 per borrower would cost roughly $250 billion, cancellation of $50,000 per borrower of debt would cost about $950 billion, and full cancellation would cost roughly $1.6 trillion. This cancellation would be on top of the current repayment pause and other targeted cancellation policies, which will have already cost the federal government at least $150 billion."

You can read the full piece and statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget at this link.

And the Committee's follow-up article on the currently-being-considered means-testing plan for student loan debt relief.

Means-Testing Student Debt Cancellation is Still Costly and Regressive

"Amid criticisms that student debt cancelation would be costly and regressive, the Biden Administration is apparently considering means-testing debt cancellation. Specifically, reports suggest the Administration may cancel $10,000 or more of federal student debt for individual borrowers making less than $125,000 or $150,000 per year and households making less than $250,000 or $300,000 per year. We estimate this would still cost at least $230 billion, with roughly 70 percent of the benefit going to those in the top half of the income spectrum. It would also worsen inflation and increase the cost of higher education."

You can read the full article at this link.

I get it, I really do.  Who wouldn't like to be relieved of some, or all, of a certain debt load? 

But the bigger societal picture needs to be considered when proposing or implementing policies like this.

There are a whole host of solid reasons not to enact student debt cancellation.  Will our elected leaders take them into consideration, or move forward without thought of how it will impact the bigger U.S. fiscal and economic picture?