Student loan debt forgiveness programs

Experts predict student loan debts will continue to rise over the foreseeable future and are likely to continue to outpace inflation. Right now student loan debt totals more than $1 trillion, with the average student leaving college with an average of $29,000 of debt.

As expected, instead of trying to find ways to curb the costs and student loan debt, the federal government has done what they always do- find a way to forgive the debts and provide relief to debtors. While alleviating the burden for students is a noble goal, the student loan debt forgiveness plans have gained so much popularity they have created a new set of concerns.

For example, according to a report by the Wall Street Journal, one student loan debt forgiveness plan has grown to $14 billion and has exceeded government expectations by 90%. One specific program called Pay As You Earn allows a borrower to pay 10% a year of their discretionary income each month. If the debt is not repaid in 10 years and the student is employed in the public sector or has a job with a nonprofit group, their student loan debt is forgiven. Private sector employees must work 20 years for debt forgiveness.

Student loan debt forgiveness benefits


There are some benefits for the student loan debt forgiveness programs. Most notably it allows students to pursue a job in their field of interest and potentially not have to delay important large purchases such as buying their first home or car.

Unfortunately, there are some obvious and very serious downsides. First, according to a report issued by the Brookings Institute, not only is the “existing program four times more costly than it needs to be in order to protect borrowers,” the programs also “creates incentives for students to borrow too much to attend college, potentially contributing to rising college prices for everyone.”

It’s the same old story…why worry about how much you spend if someone else is going to eventually pay the bills. Envision the type of shopping spree you might have if you were given a credit card with no credit limit that you did not have to repay.

That’s exactly what could happen when students decide to attend college. If there’s a chance they will not have to pay for tuition or repay their student loan debt it is likely students will borrow more recklessly. The term is moral hazard, and we’re seeing that now. Students no longer limit their risky behavior because they do not have to bear the full costs of their reckless borrowing actions.

How could student loan debt forgiveness be modified?


Critics of the programs suggest incentives could be provided to students without agreeing to forgive their loans. And while the government is not planning to eliminate the programs altogether, there has been talk, according to the Wall Street Journal, ofproposing a cap for debt eligible for forgiveness of $57,500 per student and extending the forgiveness window to 25 years.”

Cutting costs is the key to education


We need colleges to make education more affordable by forcing them to cut labor costs and trim technology budgets. Expenses could also be lowered by eliminating unnecessary bureaucracies, unnecessary buildings, money-losing sports and professors who spend little time in classrooms. We don’t need any programs which encourage institutions to raise their tuition rates.

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Beth L. is a content writer for Better Bankruptcy. Good content and information is one of many methods we utilize to bring you the answers you need.