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Why Forgiving Student Loans Is a Terrible Idea

As I start writing this, my roommate’s dog, Cooper, is on the couch next to me. One difference between Cooper and me is that Cooper does not have student loans. I do, although I intend to pay them off in full before interest ever starts up again (assuming that ever happens), unless President Biden forgives them beforehand. Interest stopped accruing on federal student loans on March 13th, 2020, and as of now, that will remain the case through August 31st, 2022 (1). So, I don’t feel in a hurry to pay them off. I must admit, paying no interest on them is a pretty big blessing. It would be even nicer for me if the remaining balance would just be forgiven and go away. President Biden has said that $10,000 per borrower should be canceled (2). However, while it would be nice for me and other college graduates to have their loans forgiven or greatly reduced, it is not a deserved form of aid, nor would it be good for the government and the cost of college in general.

If you borrow money, you should pay it back. That is the first point. When someone borrows money to pay for college, that agreement has always been made with the understanding that the money would eventually be paid back. I do not deserve to have my loans forgiven, nor do other college graduates deserve to have theirs forgiven. We borrowed that money, and we should pay it back. It is our responsibility to do so, as it is what we agreed to do. Besides, college graduates have, well, college degrees, which are decently valuable in today’s job market. While alternatives to college are cropping up, such as Google career certificates (3), going to college is still worthwhile for those with a job that requires it. The average earnings of a worker increase the higher the level of education one gets (4). For those with an associates degree, their average expected earnings are $836 per week, or $43,472 per year. Those with a doctoral degree have average earnings of $1,743 per week, or $90,636 per year. Obviously these are averages, but as a whole, why do college graduates need their loans forgiven? Only about 6.7% of the world has a college degree (5). That’s about 1 in every 15 people. The top 6.7% of the world (I’m generalizing, there are certainly many people without college degrees who are doing better financially than those with degrees) can pay their loans back.

Forgiving student loans would also be terribly expensive. It is a wealth transfer that could cost about $373 billion if $10,000 per borrower was forgiven (6). If $50,000 per borrower was forgiven, it could cost about $1 trillion. That is taking the money of people who didn’t go to college and using it to forgive the loans of people who did. To forgive student loans would also make the costs of the student loan program much higher for the federal government. In 2017, the program was not profitable, and the net cost to the government was $0.70 per every $100 borrowed to run the student loan program (7). In 2020, that number was $18.75 per every $100 borrowed. With borrowers granted the ability to pause paying back their loans in March 2020, the higher number makes sense. To forgive student loans would drastically decrease revenue for the federal government and only increase net losses from the student loan program— and the country would probably just keep going further into debt. Of course, I could argue that the government should get out of the business of student loans entirely.

Lastly, let’s try a thought experiment. If everyone who had debt on a Kwik Trip credit card was suddenly forgiven their debt because it was paid by a third party, like, say, Craig Culver, what would Kwik Trip’s response be? Well, they’d be happy to have their money back, and if they expected it to happen again, they would probably raise prices in order for that debt payment to be even larger the next time. So, if student loans get forgiven, colleges and universities would probably just keep raising costs because they expect someone else (the taxpayers) to pay the costs that the students can’t. Since 1980, inflation is up by about 236%, but college tuition and fees have increased by 1,200% in that same timeframe. Perhaps the rising costs of college should be addressed instead of the government subsidizing it and making the problem worse. Getting rid of unneeded administrative staff would be a great start.

To forgive student loans would feel nice for people like me, but it would in all likelihood create a host of unintended consequences and teach some bad lessons. Perhaps some of the nation’s student loans will be wiped out, but I am not holding my breath. Politicians don’t often deliver on campaign promises. If they did, they’d have to come up with new ones for the next election.


Curran Martin is a Minnetonka, Minnesota native and currently resides in Madison, Wisconsin. He graduated from the University of Wisconsin-Madison in May of 2019 with a degree in Economics, then spent two years working with a campus ministry, and now works in the insurance industry. Curran enjoys playing outdoor sports, learning about history and politics, and playing board games with friends in his spare time.

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