By Scott Niederjohn, Ph.D.
Student debt forgiveness schemes are both inefficient and unfair policies for helping low-income families. First, it is clear that any plan to eliminate student debt across the board would end up benefiting doctors, lawyers and many others who have or are likely to get high-earning jobs and won’t need help paying off their loans.
Further, because the majority of student debt—both nationally and in Wisconsin—is held by those in the top 40% of the income distribution, such a plan would most benefit the wealthy, contributing further to income and wealth inequality. In addition, debt forgiveness would add to inflationary pressures, as the former debt holders have freed-up money to spend on other uses.
Debt forgiveness amounts to spending $1 trillion from the federal Treasury exclusively on people who went to—and in most cases graduated from—college. This essentially punishes Americans who didn’t go to college and, because of that fact, are more likely to need government help.
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