Putting student loan forgiveness in perspective: How costly is it and who benefits?

by Sarah McFarland

A new article from Brookings evaluates the effectiveness of implementing a student loan forgiveness program, as well as more beneficial alternatives to increasing affordability. According to Looney, forgiving $50,000 in student loans would cost almost twice as much as what the federal government has spent on Pell Grant recipients over the last two decades. Even forgiving $10,000 in student loans would amount to what the government has spent on welfare since 2000 and would exceed spending since then on the school breakfast and lunch program. Black and Hispanic households, as well as those with lower levels of education, are more likely to benefit from these programs. Meanwhile, students from white, highly educated, and high-income households are more likely to have higher levels of student loan debt.

According to Looney, student loan forgiveness would place among the largest transfer programs in American history, providing a greater benefit to students from households previously mentioned with higher levels of debt. As a solution, the government should develop targeted programs to relieve poorer students. Such solutions include doubling the Pell Grant for current students and reducing loan balances for former recipients based on the amount they would have received because of this change. Another solution includes pushing income-driven repayment plans, which allow borrowers to repay loans based on the amount they can afford. Each of these solutions would reduce the benefits reaped by students who can afford college, while still increasing affordability for students in need of assistance most.

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