Loan Forgiveness – Poor Solution to US Student Debt Crisis

0
34

[ad_1]

Trillions of dollars have been raised from recent US stimulus packages and budget proposals, but the issue of student loan forgiveness has yet to be resolved. Nonetheless, the American people have not forgotten their new president’s campaign promises to tackle the growing student debt.

Some small steps have already been taken in light of the pandemic and the economic troubles that followed, which caused the federal government to suspend student loan payments and interest charges until September this year. This sticky patch has happily rekindled the debate about how to handle the US. ” $ 1.7 trillion (£ 1.2 trillion) student loan debt, as a result of which millions of people are unable to buy houses and create families.

President Biden long campaign forgiven a student loan of $ 10,000, while the more progressive wing of the Democratic Party demanded at least $ 50,000. Republicans firmly refuse to forgive, or at least demonstrate to that effect during negotiations. But all of these positions fail to address the root cause of the problem: that we are issuing thousands of new student loans every day in response to rising spending on higher education and declining funding for public postsecondary education.

This is why Covid-19 must catalyze higher education funding in a way that is not only morally correct, but also politically practical. After all, we spent $ 5 trillion on incentives over the last year; the previous package even included a provision that student loan forgiveness is tax deductiblesignaling imminent enforcement action.

However, while student loan forgiveness may be attractive, it is not a viable solution. Don’t get me wrong, as a former student paying tuition, I personally wish I could be forgiven, but this is bad public policy. A one-off fix by decree that could, in theory, be reversed by the next administration is not successful for prospective students and taxpayers alike.

The federal government can take three effective steps to begin treating the disaster it has created.

First, freezing interest accumulation for current borrowers and lowering rates for prospective undergraduate students to 0.5 percent (and 1 percent for graduate students) will lower aggregate dollars over time. This is well below our current rates starting at 3.73 percent… The government should seek to cover costs, not book $ 1.2 trillion student loan receivables under the assets.

The problem remains how graduates can return capital. The first step here is to completely redesign Public Service Loan Forgiveness (PSLF)that allows federal, state or local government officials to pay off student debt for a fraction of the actual cost over ten years.

I object to the current form of this program, which is limited less than 1 percent all borrowers. We are all part of the public good. Those who pursue higher education are better able to fulfill their civic responsibilities, understand climate issues, and pay the price. So put everyone on a reformed government (good) loan forgiveness program, starting with a 10 year income-based repayment plan. To encourage further participation, every person who makes timely payments during the year may be charged 10 percent of their balance. Ultimately, the debt of those who make 120 payments over a decade will be written off. It reconciles the narrative that personal responsibility requires people to pay back their loans with the recognition that higher education serves a public purpose, as everyone in society benefits from the presence of highly educated people.

The final step towards making it easier to pay off your debt is to make it easier to pay off your student loan in the event of bankruptcy (just like other types of debt). This not only shifts the forgiveness limit beyond the amounts proposed by the liberals to the total borrowed amount, but also accounts for the implications in a way that can be beneficial to fiscal conservatives as it will be reflected in the borrower’s credit report.

These federal-level strategies are just the beginning. States and schools must also work on creative solutions. For example, let’s look at three-year graduate degrees, frozen learning models that keep the same cost for each grade, student retention programs to improve completion rates, lifelong learning measures, and better accountability for schools.

Using Covid-19 to make sustainable changes to the main calamity of our post-secondary system is critical. If President Biden and Congress constantly squabble over the limits of forgiveness, student debt will continue to grow. There is a better way.

Avery, M.D. Davis, doctoral student Johns Hopkins University School of Education. His research focuses on post-secondary innovation.

[ad_2]

Source link