Student loan forgiveness is poised to help struggling Americans, but altogether, it may cost the country more than $1 trillion.
The United State’s national debt skyrocketed in 2020. It is already over $30 trillion, which is over $90 thousand per American citizen. Despite this, federal government programs continue overspending, and The Biden Administrations’ new student loan forgiveness programs don’t forgive any debt, they merely transfer it into the national debt — which Americans will eventually have to pay . Some are claiming that this alone may cost Americans an additional $1 trillion.
Financial literacy classes point out that owing massive debt is unhealthy. It can lead to mental, emotional, and even physical problems, but student loan forgiveness is not as simple as paying off a bill for someone else. If lenders volunteered to provide relief by reducing fees, interest rates, or even debt for individuals who are struggling, that would absolve the money owed. Unfortunately, when the federal government does it, they are merely agreeing to add that amount to the national debt, which is paid back by the taxpayers.
This causes inflation to go up, and a bevy of new financial struggles that are being reported by the Penn Wharton Budget Model. When calculating the specific amounts of student loan forgiveness released by The Biden Administration, the program costs between $469 and $519 billion over the course of the next 10 years. By extending the student loan payment pause through the end of the year, taxpayers will be paying another $16 billion.
As if this were costly enough, the new plan would prevent individuals who are making less than $15 per hour from having to make any payments. That adds another $70 billion to the student loan forgiveness price tag. Then, the plan to cover unpaid interest and absolve balances of $12 thousand or less after borrowers have made payments for 10 years is likely to cost an estimated $520 billion.
This drives the cost up to a whopping $1 trillion. That amount is well over what the Committee for a Responsible Federal Budget projected. The amount was supposed to remain between $440 billion and $600 billion, but going over budget is not uncommon when it comes to federal government programs.
The federal student loan program was supposed to actually generate revenue, but instead, it scammed college students into taking on predatory loans and cost taxpayers billions. Not only was it a major cause of the college debt crisis, but it may also be the main reason that student loan forgiveness is being passed. A 2019 federal government report displayed unlawful practices within the program and instead of shutting it down, or prosecuting those who committed these acts, federal leaders are more focused on offering aid to those involved to prevent the public from seeking charges and additional restitution.
Now, the taxpayers are being punished for faulty federal government programs and excessive spending habits. The cost of student loan forgiveness programs is projected to run much higher than previously predicted, leading to another $1 trillion deficit. This spells bad news for Americans, including the very students that this “forgiveness” is supposed to help.