Monday, February 12, 2018

Market Watch: Canceling $1.4 trillion in student debt could have major benefits for the economy

Until there's movement on this as far as Congress or the President I only see this as a pipedream. I don't know if this affects me as much as they throw around trillions of dollars, however, I wouldn't mind it if they somehow wipe out my debt.
Wiping away the $1.4 trillion in outstanding loan debt for the 44 million Americans who carry it could boost GDP by between $86 billion and $108 billion per year, on average for the 10 years following the debt cancellation, according to a report published by the Levy Economics Institute of Bard College. Getting rid of the debt would also lower the average unemployment rate by 0.22 to 0.36 percentage points over 10 years and could add between 1.2 million and 1.5 million jobs per year, it found.

“That is a dollar for dollar bump up in their net worth,” said Stephanie Kelton, a professor of economics and public policy at Stony Brook University and one of the authors of the report. In addition to becoming wealthier, these borrowers would have more disposable income to spend on houses, cars, vacations and other goods, which could fuel job growth.

The paper comes as lawmakers are considering changes to the student loan program that could decrease government subsidies to borrowers. The discussion is part of an ongoing debate about how much of the burden of student debt should be shouldered by taxpayers, often at the expense of borrowers.
Like I said I'll believe it when I see it, continuing:
Of course, cancelling borrowers’ student loans wouldn’t come for free. More than 90% of outstanding student debt is owned by the government, which means that by cancelling it, taxpayers would lose out on interest and principal payments borrowers would have gotten on the loans.

The paper also assumes the government would take responsibility for borrowers’ private student loans in some way. So student debt cancellation would increase the deficit, resulting in an increase in the deficit-to-GDP ratio of 0.65 to 0.75 points per year, the study finds.

Given that push and pull, it’s unlikely that policymakers will seriously consider widespread cancellation of student loan debt. Despite the costs of debt cancellation, Kelton said executing this kind of policy could be worth it, given the economic stimulus.
Well that was always my understand, cancelling student loan debts will wreak havoc on the financial industry. I suppose that's the main issue here, although still it would be no problem for me if the gov't finally decided just to do away with current student loans. By proxy they also just to limit the burden for students. We can help our students go to college, but is it fair to put them into significant debt?

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