Biden wants to write off $ 10,000 per person in student loan debt. But that will not solve the root problem

Data: New York Fed / Equifax Consumer Credit Panel; Graphic: Axios Visuals

There is a growing consensus among Americans who want President Biden to write off student debt – but tackling the growing debt burden is much more complicated than it looks.

Why is this important: Student debt keeps millions of Americans from buying homes, cars, and starting families. And the crisis is worsening rapidly.

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In numbers : Student debt – which stands at $ 1.550 billion – is the largest category of debt Americans owe, aside from mortgages.

  • Most borrowers are white, but black graduates on average owe $ 25,000 more than their white counterparts.

  • According to a new Harris Poll, 64% of Americans support the cancellation of part of the student debt and 55% support the cancellation of all.

What is happening: Biden proposed to immediately write off $ 10,000 in federal student loan debt for each borrower. The move would cost approximately $ 370 billion.

Yes, but: Here is what alone would not to do:

  • It would not be make a big difference to the nearly 30 million borrowers who owe over $ 10,000. Many of them have a higher education and owe hundreds of thousands of dollars.

  • It would not be stimulate the economy. Student debt prevents many from investing or buying property, which is a drag on the economy, but writing off a small amount of debt wouldn’t change that, experts say.

  • It would not be target the most vulnerable borrowers. Canceling the same amount of debt for everyone ignores the fact that many Americans in debt are also among the most educated and highest paid people.

  • It would not be help future borrowers. The problem with student debt forgiveness is that every day we make new loans in this broken system, ”says Adam Looney, an economist at the University of Utah. “You haven’t solved the problem.

Insurmountable student debt is a recent phenomenon, says Looney. It has grown six times the growth of the US economy, and it’s only getting worse.

  • There is no limit on how much students can borrow and few restrictions on how they spend the money.

  • And, on top of that, the cost of college and higher education is skyrocketing. As a result, young people are borrowing amounts of money that they cannot repay, and many are using that money to earn degrees at online or for-profit colleges with higher than average dropout rates.

What we are looking at: Among the American public, debt cancellation is no longer a fringe or far-left idea.

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