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Poorly Targeted: Student Loan Forgiveness

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Published May 25, 2021

Student loan debt won’t go away on its own, but untargeted forgiveness is not the answer. Across-the-board loan cancelation would undermine existing forgiveness programs and would primarily benefit well-off Americans. Targeted student loan assistance is a better way to benefit the people who actually need the most help.

Discussion Questions

  1. What effect would across-the-board student loan cancelation have on current forgiveness programs?
  2. Why is targeted assistance more effective than untargeted loan forgiveness?

Additional Resources

  • Read “Massive Student Loan Forgiveness Would Be a Lost Opportunity to Help Needy Americans,” by Michael Petrilli via USA Today. Available here.
  • Read “Avoid the Pitfalls of Student Loan Forgiveness,” by Richard Epstein via Defining Ideas. Available here.
  • Read “Is Student Debt Too Great?” by Gary Becker. Available here.
View Transcript

Should the federal government forgive over one trillion dollars in student loans?

During the coronavirus pandemic, it has already paused re-payments for over a year. Canceling student debt entirely is seen by many as a necessary step to help those in need.

But there are two reasons that untargeted student loan forgiveness could in fact harm the most disadvantaged Americans.

First, student loan forgiveness would primarily benefit well-off Americans. Borrowers with the largest balances are often those with advanced degrees and well-paying jobs. And spending one trillion dollars on relatively affluent degree holders would dry up federal resources that could otherwise be used for anti-poverty efforts.

Second, an across-the-board policy would undermine existing student loan forgiveness programs. These programs encourage teachers, doctors, and other public servants to work in disadvantaged areas where they are needed the most. If loan forgiveness is available regardless of public service, schools and communities will lose an important recruiting tool that they depend upon.

Targeted assistance is a better way to benefit the people who actually need the most help – including low-income individuals who are in default or delinquent on their loans.

Student loan debt won’t go away on its own, but across the board forgiveness is not the answer.