Student Loan Forgiveness: Is it Worth it?

President Biden’s plan to cancel up to $20,000 worth of student debt is in jeopardy after two lawsuits against the plan rose to the Supreme Court, who have temporarily blocked the cancellation of student debt. 

In August of last year, the White House announced a program that would forgive up to $20,000 for people receiving the Pell Grant, a grant for low income students, and $10,000 for others earning less than $125,000. 

The threat to this plan comes from two lawsuits, one from six states opposing the plan, and the other from two student borrowers who did not qualify for aid. The Supreme Court is currently reviewing whether this plan is an overreach of executive power. 

The legality of the student loan forgiveness rests on the 2003 HEROES act, which allows the Secretary of Education to alleviate student debt in a national emergency. However, during oral arguments, several Justices on the Supreme Court seemed to feel that the program is too vast (affecting over 43 million Americans) and constitutes hundreds of billions of dollars, making it a case of executive overreach. 

Student debt alleviation will be beneficial to society. Many prominent people in the Biden Administration, including Secretary of Education Miguel Cardona, believe that canceling student debt will help the economy. They point out that reducing student debt will allow people to spend money on other things, and that it eliminates the threat of a mass default. 

Currently, student debt in America amounts to almost two trillion dollars, and the pandemic has made paying this money back difficult for the average person. It is also argued that freeing up the money currently paid as student debt could lead to more spending, which would boost the economy. 

Critics of student loan forgiveness counter that while decreasing student debt may boost spending, it may also drive up inflation, a significant economic issue facing America today. Many also argue that student loan forgiveness is unfair because some people paid off their student loans in their entirety. This plan would reward financial irresponsibility, and would encourage people to take out more irresponsible loans with the hope that they’ll be bailed out by the government. 

However, this argument fails to consider how society desperately needs loan forgiveness. The fact is, the price of life milestones like homes, cars, kids and an education have risen to far outpace wages. If today’s young people are hamstrung by their student debts, then they will struggle to attain financial stability until they inherit it from the older generations. By keeping people poorer at a younger age, you squander innovation and entrepreneurship. 

While it may be true that it’s unfair to cancel debt when others have paid theirs off, in the long term everyone benefits from other people’s stability. Due to the cost of living crisis coupled with COVID, the likelihood of people defaulting on student loans is higher than ever. When people default on their loans, everybody loses. 

Student debt cancellation will be beneficial to everybody, and while it may be unfair to some, it has become necessary in the current crisis.