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Opinion A student loan bailout would do almost nothing for the economy

14:50  21 november  2020
14:50  21 november  2020 Source:   washingtonexaminer.com

Elizabeth Warren calls on Biden to cancel billions of dollars in student debt without help from Congress to aid the struggling US economy

  Elizabeth Warren calls on Biden to cancel billions of dollars in student debt without help from Congress to aid the struggling US economy "This is the single most effective executive action available for a massive economic stimulus," Warren wrote in a tweet."Biden-Harris can cancel billions of dollars in student loan debt, giving tens of millions of Americans an immediate financial boost and helping to close the racial wealth gap," the Massachussetts senator wrote in a tweet. "This is the single most effective executive action available for a massive economic stimulus.

But our current student loan system so imperfectly aligns investment with outcomes that the federal government does not distinguish loan risk between That was fatal for the college, which received 90 percent of its revenue from federal student loan programs; students have since sued the now-closed

When it comes to student loans , do we need more individual responsibility or more compassion? For the most part, the borrowing has been worth it. On average, going to college leads to higher earnings that more than offset the cost, even accounting for the ­additional expense of using debt to

Pressure from top Democrats and left-wing pundits is mounting on a presumptive Biden administration to make “canceling” student debt a priority (aka, make taxpayers pay it off). The problems with this policy are endless, from its regressive benefits that skew toward the wealthiest citizens to its creation of a moral hazard problem that would encourage future students to make poor decisions.

a group of people walking in front of a building © Provided by Washington Examiner

But in a fascinating twist, a new analysis shows that even from a progressive economic perspective, student loan cancellation would be an awful economic “stimulus” policy. Left-wing advocates have made their case, in part, based on the notion that canceling student loans would free up money for people and encourage spending, which, under “Keynesian” economic theory, stimulates the economy.

What Joe Biden Has Said about Canceling Student Loan Debt

  What Joe Biden Has Said about Canceling Student Loan Debt President-elect Joe Biden has spoken about plans for student loan debt forgiveness but without a Democrat majority in the senate, his hands may be tied.While Biden has not committed to canceling all student debt, his administration will be able to introduce changes that could affect millions of borrowers—although this will also likely depend on who controls the Senate.

Student -debt cancellation, once viewed as a niche political issue, has now, with loans topping a staggering .5 trillion, made it onto the platforms of “ For the people who already had student debt, it became more of a crisis than it would have otherwise if we hadn’t gone through the Great Recession.”

Economists are finally speaking out about the progressive plans to abolish student loan debt, and what they are saying should make everyone hop on board. They believe that eliminating student loan debt in America would be a massive boost to the US economy , so Ring of Fire’s Farron Cousins

Yet the nonpartisan Committee for a Responsible Federal Budget just threw cold water on this narrative. Their new analysis explicitly shows, using progressive economic assumptions and analysis, that canceling student loans wouldn’t do much to stimulate the economy at all.

Full student debt cancellation would cost taxpayers $1.5 trillion, the group says, but it would only increase cash flow available for spending by $90 billion in 2021.

As the analysis explains, this is “because borrowers often pay back their loans over 10, 15, or even 30 years, debt cancellation will increase their available cash by only a fraction of the total loan forgiveness.”

As a result, even this analysis, friendly to progressive assumptions about the economy, finds that a massive $1.5 trillion debt cancellation initiative would only boost economic output by $115 billion to $360 billion.

'The Squad' Ramps up Pressure on Biden to Cancel Student Loan Debt

  'The Squad' Ramps up Pressure on Biden to Cancel Student Loan Debt Representative Alexandria Ocasio-Cortez and Ayanna Pressley say their legislation would provide much-needed debt relief for 45 million workers and families , who they said are "being crushed by student debt during the COVID-19 pandemic."Rep. Pressley said in a statement: "During this unprecedented crisis, no one should have to choose between paying their student loan payment, putting food on the table or keeping themselves and their families safe and healthy."Our $1.

Many people carry the student loan debt with them throughout adulthood, even when they do not have any other debt. Here is why you should pay your student loans off early. One common misconception about student loans is that you should keep them for the tax break.

The possibility of a broad student loan forgiveness program becoming a reality is almost certainly on hold until As a result, our economy will never thrive with so many people under the boot of predatory education "Indeed, student debt abolition and free college would be a win-win for the entire country.

It’s also possible, albeit disputed and uncertain, that beneficiaries would be taxed on their student loan relief. If so, these figures would be overestimating the increased tax burden would partially offset the already minimal benefits. Even former Obama economist Jason Furman pointed this out:

So, using this amount of taxpayer money to provide another form of stimulus, such as income tax cuts or payroll tax cuts, would do far more, even under this model, to get the economy going again.

But don’t expect this thorough debunking to halt the liberal push to cancel student debt. It’s never been about facts or reality.

The very notion of a student debt “crisis” itself is overblown in its premise. The average student loan payment is between $200 and $300. That is not a crisis — it is an inconvenience, one that responsible young adults should certainly be able to handle without offloading their debts on to working-class taxpayers.

Student loan forgiveness would be a bailout for elites

  Student loan forgiveness would be a bailout for elites American voters sent a clear signal in this election that while they are ready to move on from President Trump, they are wary of giving Democrats the power to impose a sweeping left-wing agenda. © Provided by Washington Examiner In a best-case scenario for Democrats, the Biden administration will start with a smaller Democratic majority in the House and a 50-50 Senate. If Republicans can win just one of the two Georgia Senate runoff races, Democrats will be stuck in the minority in the upper chamber.

Bloomberg New Economy . Only 8 percent knew the interest rate on their loan . (That could explain why loan collectors, such as Nelnet, need to broadcast on Twitter that federal loan interest rates The students in the survey also dramatically underestimated the amount of education debt in the country.

A student loan is a type of loan designed to help students pay for post-secondary education and the associated fees, such as tuition, books and supplies, and living expenses.

So they’ve never had the moral high ground. Now, the Left have lost one of their main economic arguments in favor of debt cancellation.

We already knew that it isn’t “progressive” — student loan debt cancellation overwhelmingly benefits the well-off and well educated. And with this new analysis, even liberals must accept that debt cancellation won’t “stimulate the economy.” It barely increases cash flow and gives money to those least likely to spend it.

And it isn’t even in response to a genuine crisis. So, the case for “canceling” student loan debt is incredibly weak. Even if Democratic politicians knew this, they'd still push for cancellation to help young people with undergraduate degrees or higher, a key Democratic voting constituency.

Brad Polumbo (@Brad_Polumbo) is a Washington Examiner contributor and host of the Breaking Boundaries podcast.

Tags: Opinion, Beltway Confidential, Blog Contributors, Student Loans, Students, College, College Tuition, Higher Education, Joe Biden, Policy, Education

Original Author: Brad Polumbo

Original Location: A student loan bailout would do almost nothing for the economy

Inequality of student loan debt underscores possible Biden policy shift .
The potential forgiveness of student loan debt could be one of the biggest policy shifts in the first months of the incoming Biden administration.President-elect Joe Biden has said that student debt forgiveness will be a key part of his economic agenda, though how and to what amount the loans will be forgiven has become a point of debate among Democrats.The disproportionate impact of the debt on students of color, meanwhile, could be further accentuated in the new year, as the freeze on federal student loan payments that was implemented by the Trump administration amid the coronavirus pandemic ends at the end of December.

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