Economists Say Forgiving Student Debt Would Boost Economy


Let's come back to the United States now where presidential candidates Elizabeth Warren and Bernie Sanders are proposing student loan forgiveness plans warrants plan would forgive up to fifty thousand dollars for most people and Sanders would go further so suppose that happened what would suddenly freeing millions of Americans from student debt mean for the economy NPR's Chris Arnold reports an entire generation of Americans is making major life decisions differently because of student loans whether and when to buy a house the words start a family children it's not about if you wanna I'm it's about can you afford I'm Laura green would work for the state education agency in Montpelier Vermont well I make sixty three thousand dollars and thirty years old and I mean I probably a better salary than a lot of my peers but between her college and grad school agree with those ninety six thousand dollars in student loans and she says that's got her and her partner feeling kind of frozen yeah it's always were interested in having kids but just cost of living and all our other bells and then the student loans is just like the final straw so if people like green would suddenly had this mill stone of debt lifted from their necks it stands to reason that that would unleash pent up desires and spending that would be good for the economy a lot more people would probably have kids words start businesses serve by houses in the short term it's very positive for the housing market Lawrence Yun is the national association of realtors chief economist he says his group survey showed that student data is people delaying homeownership by five to seven years he's not endorsing any particular plan but he estimates that broad loan forgiveness would push up the number of home sales quite a bit home sales cook BSA three hundred thousand high your annually if people were not settle what law each student that of boost to the housing sector as well as to the economy just how much would it help the economy William foster is a vice president with moody's which just did a report on student debt forgiveness there's been some estimates that US real GDP could be boosted on average by eighty six billion two hundred and eight billion per year which is quite a bit that's if you had total loan forgiveness busters as it would have to be total forgiveness to see significant results and he says it could also help address rising income inequality student loans are not contributing to what's perceived as lower economic prospects for younger Americans after all all those millions of people are delaying homeownership and that's the most powerful way for most working and middle class people to build wealth Lawrence you a typical homeowner I has net worth about two hundred thirty dollars and while typical renter has only five thousand but well the idea of loan forgiveness is popular among voters it would not be free and this is a big reason that plenty of politicians and policy experts are not on board this would be expensive foster says Americans owe a lot of money on those student loans about one point five trillion and that's more than auto loans and credit cards they're the second biggest that item for households busters as most of these laws are from the federal government and it could forgive them but that would mean giving up the eighty five billion dollars in annual revenue that it's currently collecting on these loans and that would result in a wider fiscal deficit also taxing people to make up the difference would be a drag on the economy and there are other issues of many people would oppose a give away to say lawyers and doctors who stand to make a lot of money later but happen to have a lot of student loan debt also you would want to tax the working class to pay for higher income college graduates loan forgiveness that's why presidential candidates are proposing to tax the wealthy to pay for it add a foster says there could be what's called a moral hazard factor here for future students those students might expect future loan forgiveness and therefore the take out even more money than they might have otherwise and that could create even greater levels of student debt so it plenty of potential pitfalls but policy makers who are pushing for a loan forgiveness say that they have plans to make it both fair and good for the economy and to do it in a way to make education more affordable for future students so they wouldn't have to take on so much debt Chris Arnold and

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