Most student debtors cannot make their payments. It’s debt cancellation time.



In recent years, many centrists economists claimed that canceling student debt is economically regressive in that it would disproportionately favor high-income households. Yet study after study has found that this is not the case. In particular, a new study from the Roosevelt Institute explains that the “regressive myth rests on a series of deceptive methodological foundations”, demonstrating that, contrary to these regressive assertions, the cancellation of student debt at each level of cancellation proposed – Biden’s $ 10,000 proposal, Warren and Schumer’s $ 50,000 proposal, or the Institute’s own proposal of $ 75,000 – would benefit the most economically marginalized.

The Roosevelt Institute study the authors argue that previous estimates depend too heavily on annual household income, which does not fully take into account all of a household’s assets. Instead, they incorporated data on the distribution of student debt by race and household wealth, which is often overlooked in studies that show cancellation is regressive, to demonstrate that student debt cancellation is fundamentally progressive while also taking into account the impact of student debt on the general population. , not just student borrowers. The authors note that this measure “more accurately describes the magnitude of the burden on low-income households, for whom every dollar of debt is in fact a greater obstacle to economic security, to access to consumer credit. and increasing net worth. . In addition, the authors did not include private debt, since only federal student loans are eligible for cancellation under the current student debt cancellation proposals of Elizabeth Warren and Chuck Schumer as well as the Biden administration, while evaluating student debt by its costs to borrowers, lenders (Bernie Sanders, on the other hand, included private debt in its proposal).

By looking at the share of wealth, and not just student debt in absolute numbers, it becomes clear that borrowers in the lower percentiles are much more affected than their counterparts in the upper percentiles. In other words, student debt represents a larger share of annual household income or household wealth compared to higher percentile households, making repayment difficult and nearly impossible. This is precisely why the study finds that the greatest benefits of student debt cancellation accumulate for those in the bottom 40 percentile for all racial groups. Additionally, by examining the distribution of student debt by wealth and race instead of the standard income variable, the cancellation provides ample evidence that the racial wealth gap would narrow in the process. The study authors note that black borrowers would actually benefit much more from student debt cancellation than their white counterparts at every point in the income and asset distribution continuum, reflecting the fact that black borrowers need to borrow. more for their expenses than white students of equivalent income levels because of the racial wealth gap in family resources. For example, black borrowers in the poorest 10 percent of household wealth would receive around $ 17,000, while white borrowers in the same percentile would receive around $ 12,000 under the Warren-Schumer plan. Meanwhile, the wealthiest households of all ethnic groups would benefit from debt relief of $ 562 on average.

It is essential to stress the importance of this study. This is another in a long line of studies that have shown that canceling student debt is economically progressive. A leading scholar on the subject, Marshall Steinbaum of the University of Utah, have shown that the Warren-Schumer plan would see the lowest incomes who owe more than their annual income in student debt owe only a fifth of their annual income. According to a Brandeis university Analysis76 percent of student loan holders would have their debt canceled with Warren’s $ 50,000 proposal.

We have very good reason to believe that canceling student debt offers significant economic benefits that also help stimulate the economy. Previous search shown that canceling all student debt creates over a million jobs a year while increasing GDP to $ 108 billion. Over 10 years, the cancellation generates between $ 861 billion and $ 1,083 billion in real GDP in 2016 dollars. Freed from the heavy debt burden, students would use the extra money for their daily expenses and pay off the debt. other obligations.

As student debt remains in place, it causes significant and uneven damage to marginalized borrowers, which can only be reduced and corrected by cancellation. For example, as shown in a recent report at the Student Borrower Protection Center, students of color struggle disproportionately to pay off student debt at a higher rate than white students, creating a vicious cycle of racially-based economic inequality. The authors note: “The student debt crisis in America is a civil rights crisis. In addition, on average, black graduates must $ 7,400 more than white graduates. Thirty-two percent of blacks borrowers and 15 percent of Latinx borrowers are in “default” on their payments. In New York, the six communities with the highest levels Student loans in default are largely unbleached and concentrated in the Bronx, even though they have relatively lower average loan balances.

Moreover, the cost of cancellation is not a simple concept since the total amount of student debt owed by borrowers and the cancellation fees are not the same thing. As Sparky Abraham argues, lending money is a bet on the future. If a significant number of borrowers struggle to repay their debt or die in debt, canceling all debts would cost less than the total amount owed, $ 1.7 trillion. The only way the federal government will lose revenue through cancellation is when all borrowers pay off their debt.

This is the direction we are taking now, which implies that the federal government is currently collecting payments and, therefore, inevitably losing money on a considerably lower percentage than is generally assumed. The standard system – getting the loan, paying it back in fixed amounts over time – only works for about a quarter of loans. A whopping 75 percent of student debt is worn by those who do not pay or pay a fixed amount based on their annual income because they cannot pay their normal payments. This suggests that the cancellation would cost considerably less than the total owed by borrowers since the federal government would end up losing revenue due to accrued interest and the inability to pay the total student loan balance.

But, of course, the economic costs of cancellation shouldn’t even be the main deciding factor. Even if it is shown that the cancellation of student debt is economically “regressive”, it would be irrelevant. Forgiveness is an ethical issue, regardless of the “cost”. The problem that arises is the harm done to students and its moral implications. By forcing down their student debt, society is dedicating its next generation to miserable and suffering lives for nothing more than to increase the assault on neoliberalism on the general population, as Noam Chomsky points out. So student debt – not forgiveness – is the real issue. regressive politics and unfair taxation.



Source link

Previous OP-ED: American patriotism should start with fair tax laws - Orange Leader
Next Ireland longs for strong defenses against landlord despotism