The pros and cons of student loan forgiveness

Examining some of the key arguments on either side of this contentious debate

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The Supreme Court has heard arguments both for and against President Biden's controversial student loan forgiveness plan , which, if allowed to proceed, would absolve borrowers of up to $20,000 in federal debt if they earn less than $125,000 a year. Here are some of the key points on either side of this contentious debate:

Con: Forgiving debt isn't fair to people who've already made their payments

Forgiving student debt would be a "great gift" to graduates, argues the Boston Herald editorial board — but so would having your "mortgages, car loans, and … credit card debt" forgiven. "That's not on the table" though, because "adults who assume debt are supposed to be responsible and pay for the things they purchase." For that reason, others have called debt forgiveness a "slap in the face to all who sacrificed and worked extra jobs to pay off their student loans."

Pro: Debt forgiveness is the empathetic solution

But "the argument that 'this is how it was for me, so why should it be any easier for you' is a lazy interpretation of — and solution for — a crisis decades in the making," writes Christina Wyman for NBC News . In fact, harboring such resentment is just "another sinister layer in our country's long-standing problem with empathy ." Ben Burgis puts the counterargument another way to Jacobin : "If a monster lives at the edge of town and makes a regular practice of eating bits and pieces of passersby, and after this goes on for years before the town finally brings in a monster hunter to put an end to it, do the people walking around with missing fingers because of past monster attacks have a legitimate complaint? ... It's not unfair that they're finally taking care of the problem."

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Con: Student loan forgiveness could worsen inflation

While student loan forgiveness might have "seemed like a good idea" in November 2020, that time has passed, Matt Yglesias argues at Bloomberg . The "supercharged" demand from the $900 billion stimulus package and the American Rescue Plan was "superdupercharged" due to the sanctions — and resulting high oil prices — following Russia's invasion of Ukraine, meaning the economy "no longer needs stimulus — in fact, it needs to restrain demand." Since a "majority of the public" doesn't have student debt, Yglesias writes, and higher-income individuals tend to be the ones who owe money, restarting collections would come largely at the "expense of a disproportionately high-income minority of the population" while also helping to "reduce the volume of customer demand in the economy," rather than further increase it.

Pro: An imperfect solution is better than nothing

Unburdening student loan borrowers with the sweep of his pen "might not be the best form of stimulus available" to Biden, admits Annie Lowrey in The Atlantic . "Nor would it fix the country's crushing student-loan crisis, or rationalize its higher-education financing structure." But even if debt forgiveness won't instantly solve America's problems with access to higher education, financial equality, or stimulating the economy, "this is a yes-and situation, not an either/or one." While student loan debt would benefit the wealthy too, "giving money to rich people does not erode the benefits of giving money to poor people." People shouldn't get too hung up on the policy being "ideally progressive," either, Lowrey adds, because "the principle matters here too. The fact that higher education should be a public good matters."

Con: Many with student loan debt don't actually need help paying it off

Proponents of canceling student debt say it would help relieve the financial burden on lower-income students who sought higher education. Yet "in 2019, the average graduate of a four-year, non-profit college who took on loans left school with only about $29,000 in debt " while "the average four-year degree holder makes six to seven figures more during their life than someone" who only went to high school, Neal McCluskey, the director of Cato's Center for Educational Freedom, writes . "Student debt is not only often manageable, for many, it is quite profitable." Indeed, "students from families earning more than $114,000 a year borrow at the same rate as the lowest-income students — and they take out loans nearly twice as large," argues Emma Ayers for USA Today , adding that "those who decided to sign 10 years of their future paychecks away on the dotted line at the loan office shouldn't get the most reprieve simply because they spent the most."

Pro: This isn't your father's student loan crisis

People who attended college in the 1968-69 school year paid $1,545 a year, adjusted for inflation, for tuition, fees, room, and board at a public four-year college, Elise Hammond notes at CNN . "If education costs remained in line with inflation, that number would be around $12,000 per year" today — instead of the $29,033 it actually cost in 2020-21. There are students today who cover those costs with loans and manage to pay them after leaving college, "even without starting salaries so high that they invite nosebleed," Erik Sherman writes at Forbes . "Then again, there are people who can run a four-minute mile" and "memorize the first hundred digits of pi." For all the "finger-wagging" about student debt, it's worth remembering that "what was once possible — 'Oh, I put myself through college working for $100 a week during the summer when gas-powered streetlights lit the sidewalks, so why can't kids today?' — no longer is for many, if not most. To pretend that it is becomes a different form of gaslighting."

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Update March 2, 2023 : This article has been updated throughout to reflect recent developments.

Jeva Lange was the executive editor at TheWeek.com. She formerly served as The Week 's deputy editor and culture critic. She is also a contributor to Screen Slate , and her writing has appeared in The New York Daily News , The Awl , Vice, and Gothamist , among other publications. Jeva lives in New York City. Follow her on Twitter .

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Student Loan Debt Forgiveness & Elimination – Top 4 Pros and Cons

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Student loan debt is frequently in the news as politicians debate solutions to the rising costs of college that lead to sometimes crippling amounts of debt. For those with outstanding student loans, such debt can be discharged in two ways: forgiveness and bankruptcy.

Americans owed a collective $1.75 trillion in student loan debt as of Apr. 2024, with an average of $28,950 owed per borrower. By comparison, in Dec. 2010, Americans owed about $845 billion in student loan debt, which means student loan debt has increased by about 102% over the last ten years. 43.2 million million Americans held outstanding student loan debt at the end of 2024. [ 1 ] [ 2 ] [ 52 ] [ 53 ]

The New York Federal Reserve reported that about 11% of student loan debt payments were either late or in default (270 or more days late) at the beginning of 2020. By all indications, this debt, and the late payments and defaults as well, will continue to rise as college costs outpace average incomes. [ 5 ] [ 6 ] [ 7 ]

Some have proposed that the U.S. federal government forgive some or all existing student loan debt in order to relieve the financial pressure on individuals and the country. Student debt forgiveness proposals range from a discharge of $10,000 per borrower (which would forgive the entire debt bills held by about 15 million borrowers) to $50,000 per borrower (which would forgive the entire debt bills held by about 36 million borrowers) to plans that would forgive all outstanding student loan debt. Each plan would include forgiveness for those with late or in-default accounts, as well as partial debt forgiveness for many more borrowers. [ 8 ]

The Wharton School of the University of Pennsylvania estimated that, depending on details, over ten years college debt cancellation will cost between $300 billion for a one-time cancellation of $10,000 for borrowers earning under $125,000 per year and $980 billion for a one-time cancellation of $50,000 per borrower. [ 43 ]

Others have proposed making student loan debt easier to discharge through bankruptcy . Credit card debt, medical bills, auto loans, and even gambling debt can be canceled by declaring bankruptcy, but due to a 1976 federal law, discharging student loan debt is much more difficult. Private student loans have also been protected from discharge in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. According to the U.S. Department of Education, people who declare Chapter 7 or Chapter 13 bankruptcy can have student loan debt canceled but only if a court finds there is evidence of “undue hardship.” Getting student loans discharged is so difficult and rare, however, that many lawyers advise clients not to try: less than 0.5% of students clear their debts through bankruptcy. [ 9 ] [ 10 ] [ 11 ] [ 12 ] [ 13 ]

In Mar. 2020, at the beginning of the COVID-19 pandemic, President Trump paused federal student loan payments, interest accrual, and debt collection. Congress voted to keep the pause through Sep. 30, 2021, and Trump extended it again through January 2021. President Biden maintained the pause with several renewals after taking office through Dec. Dec. 31, 2022. While some disagree with the continuation of payment, interest and collection pauses, others question why federal student loan debt can’t be canceled if the federal government can do without payments for almost three years. [ 41 ]

On Aug. 24, 2022, President Biden announced a cancellation of “up to $20,000 of federal student loan debt for Pell Grant recipients, and up to $10,000 for other qualifying borrowers.” The White House stated about 43 million borrowers would qualify the cancellation, with 20 million borrowers qualifying to have their debt completely cancelled. The debt cancellation program, mired in lawsuits since its announcement, was stayed until, on June 30, 2023, the U.S. Supreme Court struck down the student loan program in a 6-3 vote under the premise that federal law does not permit the U.S. Department of Education to cancel such student loans. [ 42 ] [ 48 ] [ 49 ] [ 50 ]

As a result of the invalidation of the mass cancellation program, the Biden administration has cancelled student loan debt for several smaller groups, including students taken advantage of by “predatory” institutions. The administration states that, as of May 1, 2024, it has forgiven “more than $160 billion [in student loan debt] for nearly 4.6 million borrowers.” [ 51 ]

Should Student Loan Debt Be Eliminated via Forgiveness or Bankruptcy?

Pro 1 Student loan debt is slowing the national economy. Forgiveness would boost the economy, benefiting everyone. Student loan debt slows new business growth and quashes consumer spending. A Federal Reserve Bank of Philadelphia study finds “a significant and economically meaningful negative correlation” between student loan debt and the falling rate of new small businesses. Such debt can make getting a business (or any other) loan difficult, so people with student loan debt are less likely to be able to open businesses. And the effects snowball from there: fewer small businesses means fewer jobs and less economic output and consumer spending, which in turn means lower national income and slow economic growth for the country. [ 14 ] [ 15 ] [ 15 ] As William Foster, Vice President Senior Credit Officer, explains, “U.S. real GDP could be boosted on average by $86 billion to $108 billion per year, [which is] quite a bit… That’s if you had total loan forgiveness.” Though Foster stated total forgiveness isn’t necessary to see a positive impact. [ 16 ] President Joe Biden, when announcing his loan cancellation program, stated, “I ran for office to grow the economy from the bottom up and the middle out because when we do that, everyone does better, everybody does well. The wealthy do very well, the poor have a way up, and the middle class can have breathing room. And that’s going to help America win the economic competition of the 21st century…. That’s what today’s announcement is about. It’s about opportunity. It’s about giving people a fair shot. It’s about the one word America can be defined by: possibilities. It’s all about providing possibilities.” [ 46 ] When everyone can’t participate in the economy, the whole economy suffers. Read More
Pro 2 Student loan debt has disproportionately hurt black students. Forgiveness could help rectify racial inequity. Black college students borrow more than their white counterparts due to family income, generational wealth, parental education, and the types of colleges attended. [ 17 ] According to Judith Scott-Clayton, Senior Research Scholar with the Community College Research Center at Columbia University, interest rates and graduate school loans leave black graduates with twice as much debt as white graduates, almost $53,000 four years after graduation. Scott-Clayton also notes black graduates default on student loans at a rate of 21% while white graduates default at 4%. The disparity, she explains, is the result of most black students who default having attended predatory for-profit colleges that have overall higher default rates for all students. [ 17 ] Ashley Harrington, Federal Advocacy Director and Senior Counsel at the Center for Responsible Lending, explains the catch-22 in which students of color often find themselves: “The student debt crisis is absolutely a racial justice issue. For brown and Black folks, they often need to get more education to get the same salaries and positions that white folks can get with less education and that means how do they do that? They have to take on more debt… [The debt is then] preventing wealth building, This is something that is impacting not just individuals, it’s impacting their families, their communities.” [ 18 ] An Aug. 2020 Roosevelt Institute study concludes, “[W]hile individual white borrowers at the median stand to gain the most in absolute dollars from student debt cancellation, the relative gains for Black borrowers are much larger and the greater proportion of Black borrowers means that Black wealth overall would experience more growth as a result. Given the many advantages wealth confers in the contemporary U.S. context, the substantial increase in Black net worth is a very significant positive contribution of student debt cancellation, one with potentially transformative positive impacts for Black families overall.” The help provided by student loan debt forgiveness exceeds simple dollar amounts. [ 19 ] Read More
Pro 3 Student loan debt has infantilized a generation or more of Americans, preventing them from achieving milestones such as getting married, buying a house, or saving for retirement. Discharging such debt would help foster a healthier, most productive, more socially constructive citizenry. For women with bachelor’s degrees, each increase in $1,000 of student loan debt decreased the odds of marriage by 2% per month in the four years after graduation. [ 14 ] Student loan debt prevented about 400,000 people from buying homes between 2005 and 2014, which accounted for 25% of the decrease in home-ownership. Every $1,000 increase in student loan debt lowered the home ownership rate by 1.5% for those who attended four-year colleges. Further, student loan debtors save half as much for retirement by age 30 as those without debt. [ 14 ] [ 20 ] [ 14 ] An Aug. 2020 Roosevelt Institute study explains, “The positive effects of an evidence-based student debt cancellation policy for individuals and households extend far beyond the immediate need of removing burdensome debt. The ramifications for financial and personal well-being, credit, job stability and satisfaction, homeownership earlier in the life course, capacity to build wealth for emergencies, human capital investments, family stability, and accumulating wealth can multiply throughout a person’s life.” Choosing to go to college to compete in the job market shouldn’t prevent people from living the American dream. [ 19 ] Read More
Pro 4 Denying student loan debtors the benefits of bankruptcy--benefits that all other debtors have access to--is unfair. The U.S. Supreme Court said in 1915 that the benefits of bankruptcy allow debtors to “start afresh free from the obligations and responsibilities.” Famous business leaders from Henry Ford to President Donald Trump have used bankruptcy for a fresh start. [ 21 ] [ 22 ] Car loans, credit card charges, medical bills, and even gambling debts can be discharged in bankruptcy; not allowing educational debt to be discharged is unfair. Mark Huelsman, Senior Policy Analyst at Demos, writes, “[I]n a world where most students must borrow for a credential, borrowers should receive the same failsafe protections on these loans as they do on any other consumer loan.” [ 13 ] [ 23 ] Students who didn’t understand the consequences of taking out big loans at age 18 or who were misled about future job prospects can be saddled with six-figure debt for decades. [ 24 ] [ 25 ] Read More
Con 1 Student loan forgiveness is an abuse of the loan system. People must be held responsible for their personal economic choices. A 2020 survey found 46% of Americans believe student loan forgiveness is unfair to those who have paid off their loans, and 39% believe it unfair to those without loans. [ 26 ] Matthew Noyes, columnist at Lone Conservative , who notes the sacrifices he had to make to pay off his $27,000 in student loans, explains, “Taking out a loan is a choice, and personal responsibility shouldn’t be supplanted by taxpayer bailouts. ‘Canceling’ student loans means penalizing people like me for honoring my word and repaying the debt I chose to accept.” [ 27 ] Noyes states that the forgiveness debate is steeped in the idea that “people are entitled to a college education and other peoples’ hard work. It codifies in policy the idea that adults are not responsible for their own actions (i.e. taking on debt). In a free society, I am not entitled to a college education and neither is anyone else.” [ 27 ] Further, less than 20% of American adults have student loan debt. Is it fair to offer relief to people who over-stretched their financial capabilities to go to college and not those without student loans debt but who may still struggle financially? [ 28 ] Read More
Con 2 Student loan debt forgiveness would disproportionately help rich or more financially secure college graduates. Constantine Yannelis, Professor of Finance at the University of Chicago, finds, “Any policy that is a universal loan forgiveness policy or a capped forgiveness policy — say forgiving debt up to $50,000 — is going to give most of the dollars in forgiveness to upper-income individuals… Basically, most of the benefits will end up accruing to upper-income individuals.” [ 29 ] As journalist Emma Ayers adds, “Students from families earning more than $114,000 a year borrow at the same rate as the lowest-income students — and they take out loans nearly twice as large. Students with advanced degrees — lawyers, doctors and others — account for 40% of all student debt [according to estimates by American Progress]. And the top 25% of income-earning households hold almost half of student loan debt… Student forgiveness would largely be a hand up to the better off.” [ 30 ] Moreover, as Adam Looney, Nonresident Senior Fellow at the Brookings Institute, points out, student loan forgiveness only benefits people who went to college: “More than 90 percent of children from the highest-income families have attended college by age 22 versus 35 percent from the lowest-income families. Workers with bachelor’s degrees earn about $500,000 more over the course of their careers than individuals with high school diplomas That’s why about 34 percent of all student debt is owed by borrowers in the top quartile of the income distribution and only 12 percent owed by the bottom 25 percent. Indeed, the majority of all student debt is owed by borrowers with graduate degrees.” [ 31 ] People who borrowed for masters degrees and PhDs hold 56% of student loan debt, according to Brookings Institute estimates. Holding a masters or doctorate degree is also correlated to higher incomes. People with master’s degrees earn about $2.7 million over a lifetime, more than twice what those with high school diplomas earn ($1.3 million). PhD holders earn $3.3 million more over a lifetime. [ 32 ] [ 33 ] Inez Stepman, Senior Policy Analyst at Independent Women’s Forum for Prager University, argues, “the people who staff government bureaucracies, corporate HR departments, and school administrations—the people chiefly responsible for the woke mini-revolutions upending institution after institution [will benefit]. For this managerial class, student loan forgiveness would be great,” but the $300 billion to $1.9 trillion tax burden would be shouldered largely by the working class that didn’t attend college. [ 45 ] Read More
Con 3 Discharging student loan debt would only be a temporary bandage for the much larger problem of inflated college costs. The U.S. already has several student loan forgiveness programs and yet we’re still in a student loan debt crisis. People who work in public service jobs can have their loans forgiven after 120 loan payments. Some teachers can have up to $17,500 forgiven after five years of teaching. Nurses can have up to 60% of nursing education loans forgiven, followed by another 25%. [ 8 ] Income-driven repayment (IDR) plans are available that allow loans to be forgiven after 20-25 years of income-based payments. Military members can have up to 100% of their loans forgiven. Medical doctors and lawyers have multiple options for forgiveness. AmeriCorps service members can have 100% of their loans forgiven. [ 8 ] Betsy Mayotte, President and Founder of the Institute of Student Loan Advisors, notes, “To me the free or debt-free college proposals hold more weight [than loan forgiveness], as they address the illness itself rather than just the symptoms. Don’t get me wrong — if we could find a way to do both, we should — but reducing the debt consumers have to take out in the first place would be the thing that would have the longer-lasting benefit to the economy.” [ 15 ] The U.S. needs a solution to outsized college costs that cause students to take out loans in the first place, rather than a temporary solution that does nothing to prevent the next generation from accruing similar debt. Read More
Con 4 Student loan discharge via bankruptcy would allow borrowers to abuse the loan system and encourage colleges to increase tuition. Making it easier to discharge loans would give people an incentive to take out loans with no intention of paying them back, or to borrow more than they need. Which, in turn, could cause them to seek bankruptcy without fully realizing the negative long-term consequences on their credit scores and other aspects of their lives. [ 34 ] [ 35 ] [ 36 ] New college graduates rarely have significant assets to surrender in bankruptcy, so they have less incentive to avoid bankruptcy. [ 37 ] Student debt elimination through bankruptcy would encourage increased borrowing, and more borrowing leads to higher tuition. Abigail Hall Blanco, Assistant Professor of Economics at the University of Tampa, says, “loan forgiveness would be one giant subsidy, creating perverse incentives for both schools and students. If schools knew the government would forgive the cost of their students’ education, they’d face no incentive to cut costs to keep tuition down.” [ 38 ] [ 39 ] Read More

Discussion Questions

1. Should the U.S. federal government forgive student loan debt? How much? For whom? Explain your answers.

2. Should student loan debt be easier to discharge in bankruptcy? Explain your answer.

3. Explore the pros and cons of other programs to resolve the student loan debt issue, such as targeted relief programs, employment assistance, or aid to colleges in order to lower tuition. Explain why your chosen programs are better or worse than debt forgiveness.

Take Action

1. Analyze Senator Elizabeth Warren’s student loan forgiveness policy proposal .

2. Consider current student loan debt forgiveness programs at the U.S. Department of Education .

3. Explore Adam Looney’s position that targeted student loan relief is a better policy than forgiveness.

4. Consider how you felt about the issue before reading this article. After reading the pros and cons on this topic, has your thinking changed? If so, how? List two to three ways. If your thoughts have not changed, list two to three ways your better understanding of the “other side of the issue” now helps you better argue your position.

5. Push for the position and policies you support by writing U.S. national senators and representatives .

1.Board of Governors of the Federal Reserve System, “Consumer Credit - G.19,” federalreserve.gov, Apr. 7, 2021
2.Abigail Johnson Hess, “U.S. student debt has increased by more than 100% over the past 10 years,” cnbc.com, Dec. 22, 2020
3.US Department of Education Federal Student Aid, “Federal Student Loan Portfolio,” studentaid.gov, 2020
4.Dudley L. Poston, Jr., “3 Ways That the U.S. Population Will Change over the Next Decade,” pbs.org, Jan. 2, 2020
5.New York Federal Reserve Center for Microeconomic Data, “Quarterly Report on Household Debt and Credit 2020: Q1,” newyorkfed.org, May 2020
6.US Department of Education Federal Student Aid, “Coronavirus and Forbearance Info for Students, Borrowers, and Parents,” studentaid.gov (accessed May 6, 2021)
7.Carmen Maldonado, “Price Of College Increasing Almost 8 Times Faster Than Wages,” forbes.com, July 24, 2018
8.Hanneh Gundersen, “Federal student loan forgiveness update: See where the latest policies and proposals stand,” msn.com, May 5, 2021
9.Ashlee Kieler, “You Can’t Discharge Your Student Loans in Bankruptcy Because of Panicked 1970s Legislation,” consumerist.com, Mar. 17, 2015
10.John O’Connor, “Make Student Loan Debt Dischargeable in Bankruptcy… Again,” natlbankruptcy.com, Feb. 28, 2014
11.Federal Student Aid, “Discharge in Bankruptcy,” studentaid.ed.gov (accessed Jan. 4, 2018)
12.Bill Fay, “Bankruptcy & Student Loans,” debt.org (accessed Jan. 4, 2018)
13.Brett Greene, “The $1 Trillion Student Loan Debt Bubble: An Interview with Robert Applebaum,” huffingtonpost.com, Nov. 11, 2011
14.Christopher Ingraham, “7 Ways $1.6 Trillion in Student Loan Debt Affects the U.S. Economy,” washingtonpost.com, June 25, 2019
15.Elyssa Kirkham, “What Are the Effects of Student Loan Debt on the Economy? Experts Share Their Thoughts,” studentloanhero.com, Oct. 28, 2019
16.Chris Arnold, “Forgiving Student Debt Would Boost Economy, Economists Say,” npr.org, Nov. 25, 2019
17.Judith Scott-Clayton, “Shrinking Racial Gaps in Student Debt and Default: Recommendations to Congress,” ccrc.tc.columbia.edu, Mar. 6, 2019
18.Cristina Silva, “The Student Debt Crisis Is Crushing Black Americans. Here's How Loan Forgiveness Could Help,” usatoday.com, Apr. 15, 2021
19.Raphaël Charron-Chenier, Louise Seamster, Tom Shapiro, and Laura Sullivan, “Student Debt Forgiveness Options: Implications for Policy and Racial Equity,” rooseveltinstitute.org, Aug. 2020
20.Knowledge @ Wharton, “The Student Debt Crisis: Could It Slow the U.S. Economy?,” knowledge.wharton.upenn.edu, Oct. 22, 2018
21.US Supreme Court, Williams v. United States Fid. & Guar. Co., justia.com, 1915
22.Ethan Trex, “7 Wildly Successful People Who Survived Bankruptcy,” mentalfloss.com, Nov. 6, 2015
23.Mark Huelsman, “Want to Help Struggling Student Loan Borrowers? Start with Bankruptcy Reform,” demos.org, May 31, 2017
24.Jeffrey J. Selingo, “Did Your College Mislead You About Job Prospects? It Might Become Far Easier to Have Your Loans Forgiven.,” washingtonpost.com, July 20, 2016
25.Megan Thompson, “Are You Older Than 60 and Paying off Student Loans? Tell Us Your Story.,” pbs.org, Sep. 3, 2017
26.Rebecca Safier, “50% Say Mass Student Loan Forgiveness Unfair to Former Borrowers: Survey,” studentloanhero.com, Apr. 29, 2020
27.Matthew Noyes, “‘Canceling’ Student Debt is Unfair to Graduates Like Me Who Sacrificed to Pay Off Our Loans,” fee.org, Jan. 26, 2021
28.Zack Friedman, “Why Student Loans Should Not Get Cancelled,” forbes.com, Feb. 24, 2021
29.Knowledge @ Wharton, “How Student Loan Forgiveness Could Increase Inequality,” knowledge.wharton.upenn.edu, Dec. 15, 2020
30.Emma Ayers, “I Sold Bibles to Keep My Student Debt Low. Turns out, I Didn't even Need That Degree,” usatoday.com, Dec. 3, 2020
31.Adam Looney, “How Progressive Is Senator Elizabeth Warren’s Loan Forgiveness Proposal?,” brookings.edu, Apr. 24, 2019
32.Michelle Cheng, “What Will Canceling $10,000 in Student Debt Really Do?,” qz.com, Mar. 2, 2021
33.Anthony Carnevale, Stephen J. Rose, and Ban Cheah, “The College Payoff: Education, Occupation, Lifetime Earnings,” 2011
34.Kelsey Sheehy, “Undergrads Blow It with Student Loan Refunds,” usnews.com, July 24, 2013
35.Mike Brown, “Spring Break Student Loan Study,” lendedu.com, Mar. 8, 2017
36.Federal Student Aid, “Understanding Delinquency and Default,” studentaid.ed.gov (accessed Jan. 2, 2018)
37.Rajeev Darolia, “Should Student Loans Be Dischargeable in Bankruptcy?,” brookings.edu, Sep. 29, 2015
38.Grey Gordon and Aaron Hedlund, “Accounting for the Rise in College Tuition,” nber.org, Feb. 2016
39.Abigail Hall Blanco, “Don’t Forgive Us Our Debts: The Case against Student Loan Forgiveness,” insidesources.com, Apr. 14, 2015
40.Melanie Hanson, "Student Loan Debt Statistics," educationdata.org, Nov. 17, 2021
41.Marcos Cabello, "Biden Extends Pause on Student Loan Payments through August," , Apr. 6, 2022
42.Cory Turner and Sequoia Carrillo, "Biden Is Canceling Up to $10K in Student Loans, $20K for Pell Grant Recipients," , Aug. 24, 2022
43.Junlei Chen, "Forgiving Student Loans: Budgetary Costs and Distributional Impact," , Aug. 23, 2022
44.Junlei Chen, "The Biden Student Loan Forgiveness Plan: Budgetary Costs and Distributional Impact," , Aug. 26, 2022
45.Inez Stepman, "The Student Loan Forgiveness Scam," , Aug. 8, 2022
46.White House, "Remarks by President Biden Announcing Student Loan Debt Relief Plan," , Aug. 25, 2022
47.Ayana Archie, "Joe Biden’s Student Loan Forgiveness Plan Will Cost $400 Billion, Budget Office Says," npr.org, Sep. 27, 2022
48.Arlette Saenz and Katie Lobosco, "Biden Extends Student Loan Repayment Freeze As Forgiveness Program Is Tied Up in Courts," cnn.com, Nov. 22, 2022
49.Ariane de Vogue, "Supreme Court Says Biden’s Student Loan Forgiveness Program Remains Blocked for Now, Schedules Arguments for February," cnn.com, Dec. 1, 2022
50.Nina Totenberg and Meghanlata Gupta, "Supreme Court Kills Biden’s Student Debt Plan in a Setback for Millions of Borrowers," npr.org, June 30, 2023
51.Aimee Picchi, "Biden Forgives $6.1 Billion in Student Debt for 317,000 Borrowers. Here’s Who Qualifies for Relief.," cbsnews.com, May 1, 2024
52.Alicia Hahn, "2024 Student Loan Debt Statistics: Average Student Loan Debt," forbes.com, Apr. 18, 2024
53.Rebecca Safier and Ashley Harrison, "Student Loan Debt: Averages and Other Statistics in 2024," usatoday.com, May 10, 2024

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The “fairness” debate over student loan forgiveness, explained

Why economists are fighting over whether canceling debt is a good idea.

by Libby Nelson

Protesters in front of the White House in Washington, DC, carry signs that read, “Cancel student debt.”

For many of the 43 million Americans with federal student loan debt, President Joe Biden’s plan to forgive up to $20,000 in debt is unequivocally good news.

But in the days since the policy was announced, it has also led to pushback, debate, and controversy — arguments that are likely to be studied for months and adjudicated by researchers for years, if not decades.

There are two leading — and overlapping — criticisms of the loan forgiveness plan. One question is whether debt forgiveness is the right thing to do. It asks whether forgiving student loans is the best way to spend an estimated $500 billion , given that some, though not all, of those who benefit have college degrees and relatively high household incomes.

The other is about whether debt forgiveness is the right thing to do right now. If households freed from the burdens of their debts spend more money, it could drive inflation higher — meaning that the consequences of loan forgiveness would be borne by everyone, and soon. To dampen inflation, the Federal Reserve is actively trying to get consumers to spend less.

It’s unsurprising that Biden’s political opponents have raised these concerns. But the criticism has also extended to some economists who have served in previous Democratic administrations or consider themselves sympathetic to Biden’s goals. “Pouring roughly half trillion dollars of gasoline on the inflationary fire that is already burning is reckless,” Jason Furman, President Barack Obama’s chief economist, tweeted when Biden’s plan was announced.

Not all economists agree with Furman’s view . But the fact that the inflation debate is happening at all is a sign of how broader economic trends have shifted.

The push for student debt forgiveness was born a decade ago in the depths of the Great Recession, when even college graduates struggled to find work. Inflation was low and falling. It’s become reality under very different economic circumstances, and that shift is part of what’s fueling the current debate.

The first debate: Is loan forgiveness the right thing to do?

The Biden administration crafted its student debt forgiveness proposal in an attempt to avoid benefiting the wealthiest families. To be eligible for $10,000 in loan forgiveness, student debtors must have earned less than $125,000 (or $250,000 for a married couple) in the 2020 or 2021 tax years.

Students who receive Pell Grants to attend college — meaning they came from low-income families, overwhelmingly earning less than the median household income in the United States — are eligible for an additional $10,000 in debt relief. This is an extra boost for those who started higher education without the safety net of intergenerational wealth.

The proposal would entirely wipe out student debt for 20 million people — nearly half of the 43 million Americans who borrowed to pay for college and are still paying the loans back. An analysis from the Education Department found that almost 90 percent of the benefits would go to people earning less than $75,000 per year, though because any loans taken out before July 2022 are eligible for forgiveness, that figure includes current students and very recent graduates whose salaries could rise in the near future.

The reaction from Biden’s opponents has been to call forgiveness unfair, both to those who didn’t attend college and to those who already paid off their loans.

Senate Minority Leader Mitch McConnell, who would have perhaps the most to gain from a political backlash to the program, called the idea “a slap in the face to every family who sacrificed to save for college, every graduate who paid their debt, and every American who chose a certain career path or volunteered to serve in our Armed Forces in order to avoid taking on debt.”

This attitude is in line with how policymakers in the United States have typically viewed higher education. The federal government helps some students from poor families by offering Pell Grants that don’t have to be paid back, although the grant, which tops out at just under $7,000, means the majority of recipients still need loans . But the bulk of federal financial aid to students comes in the form of loans.

The American system of higher education finance is based on the idea that a college degree primarily benefits the individual who earns it.The federal government issues a small leg up by offering loans at a cheaper rate than a private bank would offer to an 18-year-old with no credit history or a young adult trying to support a family while earning a degree. (The current rate on an undergraduate student loan is just under 5 percent , compared to up to 14 percent from a private lender.)

A few assumptions underlie all of this: that most student loan borrowers are young people working toward bachelor’s degrees, that they will graduate, and that the degree will help them earn back more than enough to pay their debts. Hence the pushback against loan forgiveness: Why help out a 20-something who majored in philosophy at an expensive private college, instead of the 50-year-old next door with no degree at all?

But those assumptions are no longer always true. Biden’s plan is intended to fit the reality of the student loan program as it exists today. The lines between those who will benefit from debt forgiveness and those who are left on the sidelines are blurrier than blue-collar versus white-collar, working-class versus middle-class, old versus young.

One in five people with outstanding student loans is over age 50 , some of whom likely borrowed on their own behalf (including those who pursued graduate degrees) and some of whom took out loans to pay for their children’s education. Many student debtors are no longer young adults starting at a four-year college; they’re older and more likely to attend a community college or for-profit program. An analysis by Mark Huelsman, director of policy and advocacy at the Hope Center for College, Community and Justice at Temple University, found that almost 40 percent of those who entered college in the 2011-12 school year and took on student debt never earned a credential.

Forgiveness will be especially helpful to those in default — the terrifying Upside Down of the financial aid system, where, after at least 9 months of missed payments, the Education Department can garnish wages and even Social Security checks in order to get its money back. The typical defaulter did not graduate and owes just under $10,000 .

There are other versions of the fairness argument circulating. One holds that forgiveness is unfair to those who borrowed but paid off their debts — an argument that could be raised against any social program on behalf of those who were born too early to benefit from it.

The counterpoint to these critiques is that critics are holding student debt forgiveness to a fairness standard applied to few other government programs or benefits. Forgiveness could be life-changing for millions of people, especially those struggling with default, the argument goes, while hurting no one.

Which is where the other part of the critiques come in.

Is it the right thing to do right now?

The student debt forgiveness movement emerged about a decade ago from the crucible of the Great Recession. Students were borrowing more than ever to pay for college and, amid the cratering economy, were struggling to find jobs that would help them pay their loans back.

In 2012, the unemployment rate for bachelor’s degree holders was around 4.5 percent, and nearly 8 percent for college dropouts and those with two-year degrees. Interest rates were low. A prominent argument against student debt for the next eight years was that it was slowing down the economy: Young adults burdened by debt were being held back from buying homes, starting businesses, and spending money.

Few could foresee that by the time forgiveness became a reality, unemployment for bachelor’s degree recipients would have halved, interest rates would have more than doubled, and inflation would be the overriding economic concern. Even in 2019, when loan forgiveness became a serious issue in a Democratic primary campaign for the first time, inflation was rarely mentioned; by the 2020 election, with the economy contracting from the shock of the coronavirus pandemic, student debt forgiveness seemed to have a plausible path to becoming reality as a form of stimulus.

In the past year, though, things have changed. With consumer prices up 8.5 percent over a year ago, some economists now argue that debt cancellation is too big a risk. The concern is that, freed from loan debt or facing reduced payments, student borrowers will spend more at a time when the Federal Reserve is trying its best to get Americans to spend less and cool down the economy.

How much of an effect this will have — if it has one at all — is the subject of further debate.

The federal government paused repayment on most student loans during the pandemic, so millions of borrowers have not had to make a payment on their student loans in two years. The majority of student loan debtors will need to return to making some kind of payment in January, when the pause expires, even if it’s less than they would have had to pay before forgiveness.

The student loan pause was always supposed to end eventually, and it will in January. But for the past two years, the moratorium was extended multiple times, leading to an unusual situation: tens of millions of people owed student debt but didn’t have to make any payments.

Now, this situation is at the heart of the debate over inflation. When economists warn that student debt will drive up prices for everyone, what are they comparing it to? The current situation, where no one is making payments at all?

An analysis by Goldman Sachs economists found that the impact of forgiveness on inflation is likely to be offset by most borrowers resuming payments when the student loan pause ends in January. People who have had their loans forgiven will continue to pay what they’ve been paying for the past two years (nothing), meaning that their household spending should be unaffected. But people who owed more than Biden could forgive, or who earned too much to qualify for forgiveness, will have to resume making payments after two years of not doing so, meaning they’ll actually have less money to spend on everything else.

Or is the proper comparison an alternate path, where Biden allowed payments to resume for all loans, meaning that more people would owe more money per month than they will under the new plan?

Furman estimated that the loan forgiveness plan, even with the resumption of payments for most borrowers in January, could drive up inflation by 0.2 to 0.3 percentage points, compared to the alternative of resuming payments for everyone at their existing debt loads. If inflation continues to rise, prices will become more expensive for all households, meaning that American consumers broadly would pay for the consequences of debt forgiveness.

Ultimately, this argument about inflation is also tied up with the concerns about fairness. If student debt forgiveness drives inflation slightly higher, is that worth it?

Critics argue that it is not: “Student loan debt relief is spending that raises demand and increases inflation,” former Treasury Secretary Larry Summers tweeted last week. “It consumes resources that could be better used helping those who did not, for whatever reason, have the chance to attend college. It will also tend to be inflationary by raising tuitions.”

But that position is not universal. “I am not in favor of framing student-loan policy as a lever for managing inflation,” Sue Dynarski, a Harvard professor, an expert on higher education finance, and a former forgiveness skeptic, wrote in the New York Times on Tuesday. “Eliminating food subsidies for poor families — SNAP, as the food stamp program is known today — would definitely slow the economy, but that doesn’t mean we should do it.”

Where do we go from here?

One thing virtually all sides of the debate agree on is that one-time forgiveness is not enough. It is, by design, a one-off — siblings from the same family who graduate from college a few years apart, having borrowed the same amount to pay for it, could end up with debt loads that differ by thousands of dollars.

The Biden administration is hoping to make income-based student loan repayment more generous, outlining changes that would require borrowers to pay 5 percent of discretionary income per month (down from 10 percent in the current program).

But there is currently no federal plan to actually make college cheaper for students, to reduce borrowing, or to hold colleges accountable for whether students can pay off their loans. That’s not for lack of ideas or for lack of trying. The Obama administration proposed rating colleges based on the “value” they provide to students, an attempt that ultimately went nowhere.

In 2016, both Bernie Sanders and Hillary Clinton called for the federal government to partner with states to make college tuition cheaper. It inspired many of the same debates that loan forgiveness has provoked — should college be subsidized for everyone, and if so, by how much? But the “free college” program was ultimately one of the first things dropped from Democrats’ legislative agenda.

The scope of Biden’s student debt forgiveness plan might seem radical. But by leaving the ultimate structure of how American higher education is paid for unchanged, it’s actually a less dramatic departure than any of the alternatives.

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Student debt forgiveness would impact nearly every aspect of people’s lives

Subscribe to global connection, stephen roll , stephen roll research assistant professor, social policy institute, brown school - washington university in st. louis jason jabbari , and jason jabbari research assistant professor - social policy institute at washington university in st. louis michal grinstein-weiss michal grinstein-weiss nonresident senior fellow - economic studies @michalgw.

May 18, 2021

Though the emergency relief measures passed in response to the COVID-19 pandemic allowed student loan borrowers to defer their loan payments, student loan debt burdens still loom large for millions of U.S. households. According to the Federal Reserve , the national student debt level in the fourth quarter of 2020 was $1.7 trillion spread across 45 million borrowers—the highest level on record. Given the size of the debt burden, it is perhaps unsurprising that the possibility of student loan forgiveness has become a major policy discussion.

Most recently, President Joe Biden called for $10,000 in student debt forgiveness, while others, such as Senator Elizabeth Warren, have called for as much as $50,000 in debt forgiveness. Some have even called for total debt forgiveness, which would represent a larger amount of spending than the cumulative spending on unemployment insurance over the last 20 years . In a recent poll from the Center for Responsible Lending, 63 percent of respondents supported permanently reducing student loan debt by $20,000. As policymakers grapple with this question, it is important to explore how debt forgiveness might relate to household behaviors.

A student loan forgiveness experiment

To examine the relationship between student debt forgiveness and household behaviors, researchers at the Social Policy Institute conducted a survey experiment that asked participants with student debt to imagine a scenario in which the federal government forgave some amount of their student debt, and then had these participants report on how this would affect their decisions and behaviors. Participants were randomly assigned to one of four conditions that featured different levels of student debt forgiveness:

  • Condition 1: $5,000 of student debt forgiveness
  • Condition 2: $10,000 of student debt forgiveness
  • Condition 3: $20,000 of student debt forgiveness
  • Condition 4: All student debt forgiven

Participants could then select different behaviors they would engage in if their student debt were forgiven. The response options were intended to capture a wide range of experiences like working less, changing purchasing behaviors, having children or getting married, saving for different purposes, or returning to school. In total, 1,009 respondents who reported having student debt participated in the experiment.

The amount of debt forgiven matters

We present the results from this experiment in Figure 1. Generally speaking, the most common ways people reported that they would change their behaviors after student debt forgiveness—regardless of the amount forgiven—concerned their balance sheets. Large proportions of student debt holders reported that they would pay down other debts, save more for emergencies, save for a down payment on a home, or save more for retirement.

Figure 1. The relationship between the amount of student debt forgiven and household behaviors

Figure 1. The relationship between the amount of student debt forgiven and household behaviors

Source: Social Policy Institute

Note: These results are from a survey experiment in which student debt holders were randomly assigned to receive one of four levels of student debt forgiveness. The impacts of the different levels of debt forgiveness were estimated using logistic regression models that also controlled for the amount of student debt held by participants. N=1,009. The brackets on each bar represent the 95 percent confidence interval of each estimate.

Turning to the differences between experimental conditions, we see interesting patterns in the relationship between the amount of debt forgiven and household behaviors. In particular:

  • The amount of student debt forgiven was not strongly associated with either working less or paying down other debts.
  • Higher levels of student debt forgiveness were associated with higher reported rates of purchasing more/better food, making large purchases like a car or appliance, returning to school, and saving more for emergencies.
  • Student debt holders only say they would save more for retirement if all their student debt were forgiven, which implies that many student debt holders would prioritize other behaviors over the long-term goal of saving for retirement.
  • Student debt holders were also twice as likely to report that they would have a child if they received $10,000 of debt forgiveness or complete debt forgiveness as they would if they only received $5,000 of debt forgiveness ($20,000 of debt forgiveness did not produce a statistically significant difference from $5,000).
  • Higher amounts of student debt forgiveness were associated with other investment behaviors like starting a business or savings for a down payment on a home, as well as a willingness to spend more on entertainment.

The proportion of debt forgiven matters, too

In Figure 2, we shift our focus away from the amount of debt forgiveness to the proportion of debt forgiveness. For this analysis, we converted the amount of forgiveness in each experimental condition to a percentage based on each participant’s reported amount of student debt. That is, someone with $20,000 of student debt assigned to the $5,000 forgiveness condition would have 25 percent of their student debt forgiven, whereas if that person were assigned to the $10,000 forgiveness condition, they would have 50 percent of their debt forgiven. Everyone assigned to Condition 4, as well as everyone assigned to a condition that offered more student debt forgiveness than the amount of debt they owed, were coded as having 100 percent of their student debt forgiven.

Figure 2. The relationship between the proportion of student debt forgiven and household behaviors

debt forgiven. Figure 2. The relationship between the proportion of student debt forgiven and household behaviors

Note: These results are from a survey experiment in which student debt holders were randomly assigned to receive one of four levels of student debt forgiveness. The proportions were calculated by diving the amount of student debt held by the proposed amount of student debt forgiven. The impacts of the different proportions of debt forgiveness were estimated using logistic regression models that also controlled for the amount of student debt held by participants. N=1,009. The brackets on each bar represent the 95 percent confidence interval of each estimate.

Interestingly, Figure 2 shows some interesting differences in response patterns when we shift from considering the amount forgiven to the proportion forgiven.

  • There is now a clear relationship between the proportion of student debt forgiven and working less—roughly 10 percent of respondents who had 50 percent or more of their student debt forgiven would work less, compared to almost no one having 25 percent or less of their debt forgiven.
  • Respondents having less than half of their student debt forgiven were much more likely to report paying down other debts than those with higher proportions of debt forgiven.
  • The bulk of respondents saying they would be more likely to have a child if their student debt were forgiven were those who would have all their debt forgiven.
  • Respondents became much more likely to report that they would save for emergencies once the proportion of their student debt forgiven exceeds 25 percent, and were more likely to return to school when the proportion exceeds 50 percent.
  • Respondents who had all of their debt forgiven were also much more likely to report starting a business as well.

Student debt forgiveness would benefit both high- and low-income households

As a supplemental analysis, we investigated whether or not student debt holders’ incomes influenced the relationship between student debt forgiveness amounts and hypothetical changes in their behaviors. Interestingly, for the vast majority of possible behaviors, both high- and low-income households reported that different amounts of student debt forgiveness would affect them in similar ways. The one primary exception to this was in terms of savings for emergencies—low-income households were much more likely than high-income households to say that they would increase the amount they saved for emergencies as the amount of student debt forgiveness increased.

Implications

These results show two things. First, they show how extensively student debt affects debt holders. The responses to this experiment indicate that student debt is strongly influencing decisions that can have large implications for household economic stability (e.g., emergency savings) and mobility (e.g., saving for a down payment on a home, starting a business). In addition, student debt may be altering the structure of families themselves. Roughly 7 percent of respondents reported that they would be more likely to get married (results not shown) or have children if their student debt were forgiven, indicating that this debt burden is affecting even fundamental decisions about debt holders’ life trajectories.

Second, these results show that the level of student debt forgiveness matters. In particular, setting a student debt forgiveness target too low may not lead to broad-based changes in households’ economic behaviors. However, setting a student debt forgiveness amount at a point where the average debt holder would have more than a quarter of their debt forgiven may yield large changes in savings behaviors, human capital investments (e.g., returning to school), and business starts, without leading to large changes in labor supply.

As policymakers grapple with whether or not to forgive student debt, how much to forgive, and who gets their debt forgiven, it is important to consider the impact of debt forgiveness on household behaviors and how this might differ by the amount of debt held. Our results suggest that larger amounts of debt forgiveness can improve both family stability and upward mobility—especially when these amounts make up a greater proportion of their overall student debt amounts.

A proportional approach to student loan forgiveness

Among those who are considering student debt forgiveness policies, the debate is often framed as a choice between a universal or a targeted policy approach. In this debate, proponents of targeted approaches suggest that universal approaches tend to be inequitable, as they offer benefits to individuals who don’t necessarily need them, and that these approaches tend to be unfair, as these breaks do not apply to previous debt holders who paid off their student loans. As universal approaches tend to be more expensive, proponents of targeted approaches also note fiscal trade-offs, as the money used to pay off the “luxuries” of higher earners could instead be used to help lower earners meet basic needs, such as food and housing.

While the universal approach often focuses on the dollar amount of debt forgiven and the targeted approach often focuses on the income threshold for who would qualify for debt forgiveness, our results suggest that an approach forgiving a proportion of loans should be considered as an option as well. Here, policies could take into account the actual amount of individuals’ debt and forgive a certain proportion of it. This strategy could be applied to either universal or targeted debt forgiveness, or a combination of both approaches. For example, all individuals could have a proportion of their student debt forgiven, and this proportion could increase for lower-income individuals. This approach would have the benefit of addressing the equity concerns of those advocating for a more targeted approach, while still providing real and substantial benefits to student debt holders across the income spectrum.

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The economic arguments for and against Biden's student debt relief plans

Scott Horsley 2010

Scott Horsley

President Biden's plan to erase up to $20,000 in college debt for tens of millions of borrowers is drawing praise and criticism. Some welcome relief, but others say he should address tuition costs.

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Students Loans: Advantages and Disadvantages Essay

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Loan is money or property that a person borrows from a financial institution and repays it at a later date. It has interest which is compounded on an agreed period of time. Student loans are similar to this. It is the money borrowed by students to finance their education and pay bills while studying. This is repaid either upon completing studies or at an interval enshrined in the loan’s terms and conditions.

There are advantages and disadvantages of students’ loan. One is that it enables the student to settle the bills and pay school fees. The other is that it finances student’s education which is a future investment. Gaining knowledge inclines the student to good job and pay in the future. Some students come from humble background and therefore financial aid comes in handy. Since students have fewer responsibilities as compared to old adults, a loan is ideal because they are unable to fend for themselves.

There are also shortcomings of students’ loan. One is that the students get more indebted to the extent that their studies are interrupted. With high interest rates, the amount to repay is huge. This becomes more difficult especially when the loan is paid in short installments. Loans with longer installment periods have high interest rates. The other problem associated with student loan is that young adults end up delaying marriages or family formation because they want to avoid financial responsibility. This happens since much attention is turned to clearance of debts. A huge debt limits the life of a student. This is because other forms of loan cannot be secured easily elsewhere before student’s loan is settled. It is easy for financial institution to trace students’ loan repayment details.

However, students have several strategies at their disposal to repay loan and live without debts. Some students have resorted to looking for part time jobs. This makes it easier to settle the bills and pay school fees. It also saves the student the need to incur debts due to borrowing. Another strategy is cutting down expenditures. When a student lives within his or her means, unnecessary debts are dispensed. Students can also form marriages at a later period to ensure that they settle their debts first.

The amount of loans taken by students is reported to have decreased nowadays. Many students are resorting to alternative means of obtaining money such as part time jobs. Lending terms and conditions have also become tighter and so students are shunning away from borrowing. This is healthy for the students but it has negative implication on the country’s economy. When students borrow less money purchasing power declines. Low purchasing power leads to less consumption as less purchase is made. When country’s consumption declines the economics growth follows suit. This is because economic growth is a function of consumption.

Therefore, a student planning to pursue a bachelor major in a costly university like Kent State University should consider the points for and against loan as I have outlined above. The ideal step is to be aware of the huge impending debt and getting ready to look for alternative sources of money. This includes a part time job and cutting down one’s expenditure. The debt to be incurred should be within the amount earned from the job or any other periodical source of money. The decision should also factor in the amount of income one anticipates to earn in future.

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I want to lead, i want to learn, register for the newsletter, resource library, budget, deficits, and debt, demographics, defense and national security, other programs, retirement security, taxes and revenues, infographics, you are here, what are the pros and cons of student loan forgiveness.

student loans pros and cons essay

Many policymakers, including President Biden, have expressed a desire to help alleviate the financial burden of student loans and have signaled an interest in pursuing legislation aimed at cancelling some (or all) such debt. Student loan debt is one of the most prevalent forms of borrowing in the United States, with approximately 43 million Americans holding a total of $1.6 trillion in outstanding loans at the end of 2020 — almost double the $828 billion held a decade ago.

Those in favor of forgiving student debt argue that it would free up younger generations to invest in their financial future, provide a moderate boost to the economy, and help address racial and socioeconomic inequality . Opponents contend that the cost of such forgiveness would be much higher than the benefit to the economy, would disproportionately benefit higher-income Americans, and would only offer a temporary reprieve before total outstanding student debt rose again.

Arguments for Student Loan Forgiveness

Currently, more Americans owe a greater average amount of student debt than at any time in U.S. history. In 2019, 21 percent of households owed student debt at an average amount of about $42,000; by comparison, only 8 percent of households held student debt 30 years before, and the average amount was just $11,500 (after adjusting for inflation).

student loans pros and cons essay

Proponents of student loan forgiveness argue that the elimination of some or all of such debt would mitigate the harmful effects it has on the economy, including reduced home ownership , lower borrower net worth , and hampered small business formation .

Advocates also contend that student loan forgiveness could help improve racial inequality of income . For example, borrowers of color are more likely to hold student debt, owe larger amounts of student debt on average, and often experience more difficulty repaying their loans than white borrowers . According to a study from the National Center for Education Statistics, the average student loan for black borrowers is nearly 50 percent larger (around $13,000 higher) than that for white borrowers .

student loans pros and cons essay

Arguments Against Student Loan Forgiveness

Opponents of student loan cancellation argue that widespread forgiveness would provide little economic boost relative to the projected cost while doing nothing to address the underlying drivers of the growth in student debt , namely soaring tuition costs that have outpaced the growth of median wages .

Some critics also argue that loan forgiveness could disproportionately benefit high-income households . According an analysis from the Brookings Institution, over half of the outstanding student loan debt in 2019 was held by individuals in the top two income quintiles – those individuals are much less likely to have trouble paying back their loans. What’s more, projections from the American Action Forum and the Brookings Institution both show that families in the top two income quintiles would receive more than half of the benefits associated with student debt relief.

student loans pros and cons essay

How Could Student Loan Forgiveness Affect Borrowers, the Government, and the Economy?

Reducing the debt burden of borrowers through student loan forgiveness would provide significant financial relief to many millions of Americans. According to the Committee for a Responsible Federal Budget (CRFB), forgiving $10,000 in student debt per borrower would eliminate student debt for about 15 million borrowers, or one-third of the individuals who hold it , and reduce total debt obligations for the other 28 million borrowers, all while lowering the total national student debt portfolio by $400 billion (25 percent). According to the same analysis, a policy that instead forgave $50,000 in student loans per borrower would eliminate debt obligations for nearly 36 million borrowers (84 percent of all individuals who owe student debt) and significantly reduce debt for the remaining 7 million borrowers. CRFB estimates that such a policy would slash the total student debt portfolio by $1.1 trillion (69 percent) to around $500 billion.

Although cancelling student debt would alleviate the financial burdens facing many millions of Americans, it would also cost the federal government significantly in forgone loan and interest payments . According to CRFB’s projections, forgiving $10,000 in student debt per borrower would cost roughly $245 billion, while forgiving $50,000 per borrower would cost $950 billion.

CRFB’s analysis finds that $10,000 in student loan forgiveness would only boost gross domestic product (GDP) by $31 billion over three years, while $50,000 in forgiveness would boost GDP by $91 billion over the same period. Therefore, policies that forgive student debt by $10,000 and $50,000 per borrower would have a net fiscal multiplier (increase in economic output relative to budgetary cost) of 0.13 and 0.10 respectively. For context, most legislation enacted to combat the economic effects of COVID-19 had fiscal multipliers between 0.4 and 0.9.

student loans pros and cons essay

A policy that partially cancels outstanding student debt in some amount could have a positive impact on the financial health of many millions of Americans, but it also could be costly to the government, provide outsized benefits to high-income households, and yield minimal effects on overall economic output. Moreover, absent reforms to the underlying drivers of student debt (i.e., rising tuition costs, post-grad employment opportunities, state funding to public universities, etc.), the size of the U.S. student debt portfolio could quickly return to, or even surpass, its present amount.

Efforts more targeted to address the underlying student debt problem may involve increased accountability for schools with high debt and default rates among their borrowers, increased transparency around tuition prices and other higher education costs, and investments in alternative educational opportunities such as trade schools, apprenticeships, and technical education.

As policymakers continue to debate student loan reforms, it is critical that any efforts to lessen the burden facing the millions of Americans are considered together with the complex set of benefits and challenges to our economy, our citizens, the federal budget, and our system of education financing.

Related: What is Free College and How Much Would It Cost?

student loans pros and cons essay

Image credit: Photo by Sean Rayford/Getty Images

Expert Views: Fiscal Commission

National debt clock.

The Pros and Cons of Taking Out Student Loans: Is College Debt Worth It

In today’s fast-paced world, a college education is often seen as a ticket to a brighter future. However, the rising cost of tuition has made it increasingly challenging for many students to pursue higher education without financial assistance. This article will explore the pros and cons of taking out student loans, helping you make an informed decision about whether college debt is worth it.

Making the Decision: Factors to Consider

When contemplating whether to take out student loans, it’s essential to consider several key factors. First and foremost, evaluate your career goals and the earning potential associated with your chosen field of study. Some careers offer higher salaries, making it easier to manage student loan debt, while others may not provide as much financial flexibility. Researching salary data and job market demand in your field can be instrumental in this decision-making process.

Secondly, assess your current financial situation. Are there other sources of funding available, such as scholarships, grants, or part-time work? Reducing your reliance on loans can significantly impact your long-term financial health. Creating a budget that outlines your income, expenses, and anticipated loan payments can provide a clearer picture of your financial future with student debt.

The pros of student loans

Access to higher education.

One of the most significant advantages of student loans is that they provide access to higher education for individuals who may not otherwise afford it. Scholarships and grants are limited, and loans bridge the financial gap for countless students.

Potential for Higher Earnings

Studies have shown that individuals with a college degree tend to earn more over their lifetime compared to those without one. Student loans can be seen as an investment in your future earning potential.

Flexible Repayment Options

Federal student loans often come with flexible repayment options, such as income-driven repayment plans. This means that your monthly payments can be adjusted based on your income, making it more manageable.

The Cons of Student Loans

Accumulating debt.

The most apparent downside to student loans is the accumulation of debt. Graduating with a significant amount of student debt can be financially burdensome and impact your long-term financial goals.

Interest Accrual

Student loans typically accrue interest while you’re in school, during your grace period, and even during deferment. This can substantially increase the total amount you owe over time.

Delayed Financial Milestones

Having student loan debt may delay other important financial milestones, such as buying a home or saving for retirement. The weight of your debt may limit your ability to achieve these goals.

Seeking Guidance and Financial Literacy

Lastly, don’t hesitate to seek guidance and advice from financial aid counselors, career advisors, and mentors. These professionals can provide valuable insights into managing student loans effectively and offer alternative strategies for financing your education. Additionally, improving your financial literacy by attending workshops or online courses can empower you to make informed financial decisions throughout your college journey and beyond. Remember that the decision to take out student loans is a significant one, and it’s crucial to be well-informed and proactive in managing your financial well-being.

By carefully considering these factors, seeking advice when needed, and enhancing your financial literacy, you can make a more confident decision about whether taking out student loans aligns with your educational and financial goals.

In conclusion, the decision to take out student loans should not be taken lightly. While they provide access to education and the potential for higher earnings, they also come with the burden of debt and financial responsibilities. It’s essential to weigh the pros and cons carefully, consider alternative sources of funding, and plan your financial future accordingly.

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Biden wants to forgive lots of student debt, but at what cost?

The president-elect campaigned for $10k loan forgiveness, but many experts say the political carrot is fraught with economic and moral hazards.

student loans pros and cons essay

By Marjorie Cortez

SALT LAKE CITY — As a presidential candidate, Democrat Joe Biden vowed to forgive at least $10,000 in student loan debt per borrower, which could eliminate loans for some 16 million people — more than a third of current borrowers.

This past week, members of President-elect’s Biden’s transition team said that as soon as he takes office, he will extend suspension of federal student loan payments put into place in the early days of the COVID-19 pandemic.

He will also encourage Congress to pass legislation to forgive $10,000 in federal student loan debt per person, although some Senate Democrats such as Majority Leader Chuck Schumer, D-N.Y., and Sen. Elizabeth Warren , D-Mass., have said that doesn’t go far enough.

The carrot of retiring student loan debt is highly appealing to many college graduates. Americans owe $1.7 trillion in student loan debt, which has risen by roughly $1 trillion since 2009, according to the Federal Reserve. That’s more than any other category of consumer debt except mortgages.

But economists and others say such a public policy would be unfair to most Americans, would reward the wealthiest at the expense of the poor, and simply shifts private debt to public debt. Some studies show that forgiving so much student debt would also cost more than any kind of economic stimulus it would create.

And consider, if students expect to have their debts forgiven , doesn’t that encourage them to borrow even more?

Critics also say forgiving student debt doesn’t help educate more of the population, but only provides benefits to those who already have an education.

student loans pros and cons essay

More than 44.7 million people carry student debt averaging $32,731, according to a September 2019 report to the U.S. House of Representatives’ Committee on Financial Services.

“This ballooning rate of student loans debt is attributed, in part, to the rising real price of public higher education and stagnant household incomes. The real, after-inflation average cost to attend a four-year public institution rose 48.1% between 2003 and 2017, which corresponds to an increase in the real, after-inflation accumulated amount of student debt of 307% in the same time period,” the report states.

Proponents of the federal Public Service Loan Forgiveness Program say it helps attract talent to the government and nonprofit sectors, incentivizes employee retention and provides relief for public service professionals who are often paid less than they would in the private sector.

The Aspen Institute reported in February 2020 that student loan debt is “a roadblock to long-term financial security” affecting borrowers’ ability to save for retirement or emergencies or to purchase homes.

Not a sure thing

Utah’s 2021 Teacher of the Year John Arthur believed he was on the path to public service student loan forgiveness, a program that calls for 10 years of on-time and consecutive monthly loan payments in order to be considered for discharge of the loan balance.

Arthur, who has about $40,000 in student loan debt after earning master’s degrees in teaching and education from Westminster College, opted to participate in the income-based repayment program.

“My wife and I chose to file our taxes separately, even though we would have gotten a bigger return” had they filed jointly, he said.

Five years into on-time loan payments, Arthur learned of another loan forgiveness program that offered $5,000 in student loan forgiveness for educators who teach at Title I schools. Arthur teaches at Salt Lake City’s Meadowlark Elementary School, which is a Title I school and recently was in academic turnaround.

“So I applied for that $5,000 and I got it. The problem was once I got that $5,000 forgiven, it reset the other program. It went back to zero and I had start over” after seven years of payment, he said.

He was shocked and profoundly disappointed.

“I feel like I’m a relatively intelligent guy. I read paperwork pretty closely but I somehow missed the part where you can’t do both programs. I talked to advisers from the banks and loan people ahead of time, and just no one had ever mentioned that you couldn’t do both,” he said.

Arthur said he is carefully monitoring news reports of loan forgiveness that may be extended under the Biden administration . His experience suggests loan forgiveness is not a sure thing.

According to a September 2020 U.S. Department of Education report, among 229,215 applications to the federal Public Service Loan Forgiveness Program, 205,744 were deemed ineligible — just shy of 90%. Some of the reasons included missed payments, missing information or the loans were ineligible.

student loans pros and cons essay

Among 179,371 unique borrowers submitting applications in that reporting period, just 1.75% or 3,469 were granted forgiveness.

“If you’re trying to entice people into public service, and this is like the one benefit that the federal government can offer to people entering our profession, then you’ve got to keep it simple and clear and without the denial rate,” Arthur said.

If the goal is to stabilize the workforce, it would make more sense to offer employees signing bonuses rather than extend the prospect of loan forgiveness that may or may not materialize a decade into their careers, he said.

Arthur, who teaches sixth grade, said he is “a patient guy. I can endure a lot with a goal off in the distance, even if I can’t see it. But the idea of being enticed into the profession for something that I won’t get to take advantage of for a decade, is not a decision-maker for me, and I can’t imagine it is for most people.”

Higher education perspective

Kristin Hadley, dean of Weber State University’s College of Education, said students and professors occasionally talk about public service loan forgiveness as students proceed through teacher training programs.

“You know, we do talk about it, minimally,” Hadley said.

But the faculty has not really pushed it because “we’ve received feedback from a number of students who have gone out teaching expecting student loan forgiveness and found that so many of the applications were rejected,” Hadley said.

Students are better served by mechanisms that help keep the costs of college attendance manageable such private scholarships, she said. Thanks to generous donors, many of Weber State’s teaching candidates receive scholarships.

“We have another program that is specifically targeted for our students who are working as teaching assistants in the schools. That is a tuition assistance program and we’ve worked in collaboration with our local districts on that program. It’s been really successful in getting people all the way through and into the profession and staying in the profession, which is huge nowadays,” she said.

In recent years, the Utah System of Higher Education has taken several steps intended to make college more accessible and affordable. Some state scholarships have been shifted to need-based awards and there has been greater of scrutiny of colleges’ and universities’ proposed tuition and fee increases.

The system has also placed a greater emphasis on Free Application for Federal Student Aid — or FAFSA — completion by eligible high school seniors. The application enables qualifying students to access federal, state and institutional aid in the form of grants, work-study and federal student loans.

Political pressure not to forgive

In one of her final acts before stepping down in the wake of the violent attack on the Capitol by pro-Trump rioters, Education Secretary Betsy DeVos told Senate Majority Leader Mitch McConnell that the student loan forgiveness proposal is “misguided.”

“Across-the-board forgiveness of college debts is not only unfair to most Americans, it is also the most regressive of policy proposals — rewarding the wealthiest sector of our labor force at the expense of the poorest,” she wrote in a letter to McConnell.

She urged Congress to consider establishing the office of Federal Student Aid as a stand-alone government corporation apart from the Education Department run by a professional, apolitical board of governors.

“This move would better position the agency to deliver world-class services to students and their families, and to manage what has become the nation’s largest consumer lender, with nearly $1.6 trillion in outstanding loans. I urge you to look closely at that proposal,” DeVos wrote.

Others question the efficacy of loan forgiveness.

An analysis by the Committee for a Responsible Federal Budget released in November, concluded that “student debt cancellation would be an ineffective form of stimulus, providing a small boost to the near-term economy relative to the cost.”

The analysis showed:

  • Student debt cancellation will increase cash flow by only $90 billion per year, at a cost of $1.5 trillion.
  • Student debt cancellation is poorly targeted to those most likely to spend, given that nearly three-quarters of repayments would come from the top 40% of earners.
  • Simply extending the current executive action to defer loan repayments and cancel interest would achieve much of the economic benefit of loan cancellation at only a very small fraction of the cost.

Freakonomics contributor Justin Wolfers was more succinct in his 2011 analysis.

He called it the “Worst. Idea. Ever.”

Student loan forgiveness forgives the debt of people who already have an education, he said.

“Want to increase access to education? Make loans more widely available, or subsidize those who are yet to choose whether to go to school. But this proposal is just a lump-sum transfer that won’t increase education attainment. So why transfer to these folks?” he wrote.

Moral hazard

David Schwanke, interim executive director of the Utah Higher Education Assistance Authority, said individual loans serviced by the agency are typically $5,000 to $6,000 or around $15,000 for a borrower with multiple loans.

The prospect of forgiving $10,000 would make a difference to some borrowers but it would be limited to those who have loans through the Federal Direct program. Loan portfolios owned by private entities would not be eligible.

Loan forgiveness initiatives raise a number of public policy, economic and moral questions, he said.

Schwanke, who himself took out student loans and repaid them, said he appreciates that putting yourself through college financially isn’t easy.

“It takes real dollars and it takes work to get it done,” he said. But there are several existing programs that help borrowers manage their cash flows, he said.

“The question is, is it good public policy to administer some level of across-the-board loan forgiveness for the roughly 33% of Americans who obtain a college degree and transfer that to public debt, where you have the other 67% of the population, supporting the higher education of essentially those who have a college degree?” Schwanke said.

Sixty percent of educational debt owed by households is in the top 40% of earners, those earning $75,000 or more annually, he said.

“If you forgive somebody’s loan today what’s to stop the next generation from asking, ‘Are they going to forgive my loan? I’ll just go ahead and borrow because I expect that they’ll forgive it,’ so it creates a moral hazard,” he said.

Loan forgiveness essentially shifts private debt to public debt, he said.

“The money’s got to come from somewhere and it increases the national debt so you’re shifting it from private payments to taxpayer payments. Either taxes have to go up or services have to go down. Somehow it would have to be paid for,” he said.

Schwanke said 30% of undergraduates have no debt while 25% have up to $20,000 in loans.

Ability to repay debt is not necessarily tied to the amount of debt.

“You do read a lot in the headlines about these borrowers who are in dire situations who have $100,000 in debt or more. They really represent only about 6% of outstanding debt,” he said.

“It’s not necessarily those individuals who come out of dental school or medical school with quite a bit of debt that we have delinquency issues with. It’s the individual who borrows $2,500 and then they drop out and they’re making minimum wage and trying to manage a payment. Those are the ones that we worry more about because it’s just more difficult for them to make that payment,” Schwanke said.

A case for loan forgiveness

Meanwhile, a 2018 report by The Levy Economics Institute of Bard College, a nonprofit, nonpartisan, public policy think tank, argues for debt forgiveness.

“We find that student debt cancellation produces positive feedback effects that improve several macroeconomic variables, including gross domestic product and job growth, while imposing only moderate increases on the federal deficit and interest rates and no significant inflationary pressure.

“These results support the continued inclusion of bold proposals such as student debt cancellation in public policy deliberations surrounding the future of higher education in the United States.”

The 2019 report found if the government canceled the debt it owns and bought out remaining private creditors, it would increase the GDP by between $86 billion and $108 billion per year over the next decade and add 1.2 million to 1.5 million jobs.

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  • Business Loans

Pros And Cons Of Business Loans

Cassidy Horton

Published: Jun 14, 2024, 11:26am

Pros And Cons Of Business Loans

Business loans offer financing for business growth and expansion. However, you can strain your business’s revenue if you don’t use your loan properly. Before you pursue a business loan, weigh the pros and cons and make the best decision for your company.

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How Does a Business Loan Work?

Traditional banks, online lenders and credit unions offer business loans as a way for companies to get cash infusions. Depending on your lender, funds may be disbursed as a lump-sum payment, where you pay interest on the full loan amount, or as a revolving line of credit, where you pay interest only on your balance. Payment schedules vary by lender and loan type, and your company is responsible for repaying the loan’s principal, interest and fees on time.

Business Loan Pros

Before you take out a business loan, review the benefits and make sure they align with your business goals.

Several Financing Options

There are a variety of business loans available to meet your business’s specific needs or goals. Explore different loans and choose the one that provides the right amount of financing. A few options include:

  • Working capital loans for day-to-day expenses
  • Business lines of credit for a revolving credit line
  • Startup business loans designed for new companies
  • Equipment loans to pay for new machinery

Certain business loan types can be more valuable than others, depending on how your business operates. For example, a new company may benefit from a startup loan available to businesses with little credit history. In contrast, an established business may value a business line of credit for ongoing expenses.

Fast Access to Capital

Online lenders approve and disburse business funding faster than traditional banks and credit unions. Funding typically arrives within one or two business days after approval; some lenders even offer same-day funding. Quick loan disbursement is helpful when facing urgent expenses or pursuing time-sensitive growth opportunities.

Larger Loan Amounts

Business loan amounts can reach $500,000—or even $5 million in funding. These loan sizes are ideal for buying real estate, opening new locations, increasing production and taking on other growth opportunities.

Builds Business Credit

Making consistent payments can help you build your business credit as long as your lender reports those payments to the main business credit bureaus. Lenders, suppliers and insurance companies may use business credit to assess the risk of working with you. A strong business credit score may help you qualify for more favorable terms.

Helps You Maintain Control

If you’re torn between equity financing or loan financing, a business loan keeps you in full control of your company. Unlike trading company shares for capital, you retain the power to make all business decisions.

Business Loan Cons

Review the disadvantages of a business loan and weigh them against your company’s financial goals.

Stringent Eligibility Requirements

Lenders take on a considerable amount of risk when they approve business loans. For that reason, most lenders set minimum borrowing requirements , including:

  • Annual revenue between $100,000 and $200,000
  • One to two years in business
  • Minimum credit score of 600

Stringent requirements can make it challenging for newer or less established businesses to qualify for a business loan. If you do not meet the above requirements, consider a bad credit business loan .

May Require Collateral or a Personal Guarantee

Many business loan lenders require that you pledge collateral or sign a personal guarantee during application.

Collateral is where you pledge real estate, equipment or other assets that the lender can seize if you don’t repay the loan. A personal guarantee, on the other hand, makes you legally responsible for repaying the loan with your personal assets if your business cannot, which puts your credit score and assets at risk.

High Interest Rates

Business loans typically have high interest rates compared to other lending products such as personal loans. Your interest rate is based on the type of loan you apply for, the lender you choose, your credit score and business history. Lowering your credit score, however, is typically the best way to land more favorable rates.

Financial Strain on Your Business

Taking on a business loan often means committing to regular daily, weekly or monthly payments, which can strain your company’s finances if you don’t generate enough revenue.

Business loans can also limit your flexibility, stifle growth and, in a worst-case scenario, send you into a debt spiral. It’s crucial to review your cash flow before taking out a loan and consider the relevant factors.

Is a Business Loan Right for You?

A business loan is a good option if you have a clear plan for growing your business, whether it’s expanding operations, buying inventory or investing in marketing, and you can afford the recurring payments. However, a business loan may not be ideal if you don’t have a clear plan for using your funds or if your business has outstanding debt that could make it difficult to repay your business loan.

Alternatives to Business Loans

If you decide against using a business loan, consider a few alternative options.

Business Credit Cards

Business credit cards offer access to revolving credit with set borrowing limits similar to a personal credit card. However, they typically have higher credit limits and more lucrative rewards for spending on office supplies, flights, hotels, and more. We recommend opening a business credit card as a business owner to track and document your company’s expenses over time.

Crowdfunding

Crowdfunding involves gathering funds from family members, friends, neighbors and other individuals you may have a relationship with. You can also use crowdfunding platforms to connect with individuals that you don’t know. Unlike business loans, crowdfunding requires no repayment.

Equity Financing

Some businesses exchange company shares for additional funding from investors. Your investors will want to see your business plan and how their funding will fit into it, so make sure you have a solid and presentable plan to present.

Offering equity will give your investors ownership authority in your company.

Business grants are lump-sum awards available to businesses through the federal government, private corporations and other entities. Grants, much like crowdfunding, require no repayment. However, you may need to write a proposal or submit other materials that demonstrate your funding needs and how you’ll use it to enhance your business.

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Cassidy Horton is a finance writer covering banking, life insurance and business loans. She has worked with top finance brands including NerdWallet, MarketWatch and Consumer Affairs. Cassidy first became interested in personal finance after paying off $18,000 in debt within 10 months of graduating college. She later went on to triple her salary in two years by ditching her 8-to-5 job to write for a living.

Pros and Cons of Different Business Loans

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Pros and Cons of Different Business Loans

Small businesses are the backbone of this country. They employ over half the workers and drive the economy. In the course of these small businesses conducting business, they often need a loan. There are several loan types available that can meet various needs.

Term Loans Good for Investments and Ongoing Needs

A term loan is when you borrow a set amount of money and then pay it back with interest. It has a specific repayment schedule.

There are long-term and short-term loans. You might want to consider a long-term loan if you have a large purchase and good credit. For small to medium purchases, a short-term loan might suffice.

Some reasons you might want a term loan include acquiring a new business, expansion, or buying real estate.

  • low interest rates (long-term)
  • manageable monthly repayment schedule (long-term)
  • fast funding (short-term)
  • relaxed eligibility requirements (short-term)
  • requires strong credit (long-term)
  • loan approvals take a while (long-term)
  • high interest rates (short-term)
  • often comes with daily or weekly repayments (short-term)

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  • 7(a) loans—most common offer up to $5 million in working capital
  • 504 loans—offered up to $5 million used to purchase major fixed assets like equipment or real estate. An asset is used as collateral to secure loan.
  • Microloans—offered up to $50,000 and repayment terms are six years. Used to launch or grow. Can’t be used to repay debts or buy real estate.
  • low interest rates that are capped
  • long repayment terms of 10–25 years
  • multiple loan options
  • government guarantee
  • prepayment penalties apply
  • funding can take 60–90 days
  • strict borrower qualifications
  • can require a down payment

Business Line of Credit for Ongoing Needs

There is a draw period during which you can withdraw money. As you withdraw, interest begins to accumulate. Once the draw period closes, you have to pay the principal and interest payments

  • make withdrawals as needed
  • only pay interest on outstanding balance
  • quick access to funds
  • low borrowing limits
  • high interest rates
  • origination fees
  • can require collateral or a personal guarantee

Merchant Cash Advance Helps Cash Flow

With a merchant cash advance, the lender offers cash in exchange for a portion of future credit card sales. They then take a portion of every credit card or debit sale until the advance is paid off. You, of course, pay interest on the advance.

Merchant cash-advance loans are not regulated by law, so they can be expensive. Depending on your lender’s terms, you may have to make daily payments.

  • quick access to cash
  • no collateral needed
  • bad credit usually accepted
  • lowers profit by paying a percentage of sales
  • daily repayment can impact cash flow
  • lender takes credit and debit card payments

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Pros And Cons Of Getting An MBA

Published 25 Jun 2024

What first pops into your head when hearing “MBA”? A “Master of Business Administration” degree, also known as an MBA, is a worldwide-recognized degree designed to prepare and instill people with critical skillsets for specific careers in Business and Management. MBA entered in the early 1900s and quickly became one of the most prestigious degrees to earn nowadays.

Attempting to get an MBA to engage in a business path does offer advantages such as increasing career opportunities, building professional networks, and earning significant salaries, but it also has certain downsides, such as high cost, huge commitment, and competitive conditions. Now, among many available, high-value degrees that students can choose from, the question of whether acquiring an MBA is truly worth the effort has emerged.

To begin with, it is undeniable that a business degree can offer students lots of career opportunities. A bachelor’s degree in business surely prepares students enough to work in many popular fields such as finance, marketing, accounting, management, or even a startup business, but getting an MBA afterward will increase their chances of taking a better shot at success. Employees can easily feel bored and stagnated if their work is tedious, repetitive, and monotonous. In this situation, an MBA owner is more likely to escape the tedium as they have a variety of suitable fields to enroll in because they are professionals with at least three years of work experience. Therefore, workers who earn this degree certainly have an edge over other competitors.

The degree can also give them higher chances of becoming leaders, which eventually boosts their likeliness of acquiring their dream job. According to the Mba.com website, almost half (43%) of MBA students want to switch careers and pursue opportunities in fields which they have not worked in before, 27% wish to accumulate experience to gain a competitive edge as they continue down their current job, and 29% want to start their path becoming entrepreneurs.

The business world is ever-changing; one’s ability to adapt to the accelerating pace is crucial in order to seize any long-term career success. Hence, in career progression, MBA graduates usually exceed. Secondly, developing a professional network is one of the advantages the MBA program offers that should not be overlooked. The course aids students in understanding the importance of self-awareness and how to build interpersonal relationships in the workplace. In addition, they will learn how to manage emotional behavior and enhance relationship-building skills at a professional level. During the course, MBA students meet peers with multiple backgrounds and many guest speakers. Through interaction, students extend their contacts beyond campus and expand their chances of getting a dream job. Professional contacts help students be aware of many potential working opportunities when they may not notice. According to LinkedIn, approximately 80 percent of professional workers see networking is one of the most critical factors leading to career progression success, and most of them personally address that professional relationship brings them more chances.

The Princeton Review, through the research of the Business Network International (BNI), states that “98 percent of businesses rely on referrals to gain new clients and partnerships”. Finally, and also considered one of the main reasons why this degree is so tempting, MBA graduates can earn an absurdly huge amount of salary within a few years of working. Of course, the expense in order to pursue an MBA program can be huge, but it can also be a worthwhile investment in the future. According to a GMAC Alumni Perspectives Survey (based on the opinion of 4,135 MBA alumni), graduates state that they could redeem about one-third of the overall study expense within the first year of working. Some people even say they can gain twice as much as the financial cost of the degree within ten years. After having worked for several years in the fields, many BBA graduates firmly express how the MBA can be a game changer in career advancement and payment, and that they are willing to head back to school to pursue the degree. According to the Neuvoo.ca website, the median MBA salary per year is $72,654, which is about $37,26 per hour; the starting wage is extremely attractive at around $24,161 per year, and experienced workers can earn up to more than $100,000 each year.

Read also: For top-notch MBA assignment help , trust our experts to deliver high-quality work.

An MBA is a considerable investment exchanged for a very promising career progression. But there are many alternative routes to seize career success. Firstly, an MBA is crazy expensive; its price has gone up dramatically over the last 15 years. The rank of the school they choose to attend greatly affects the degree's value. For example, an MBA graduate from Harvard can easily earn a starting salary twice as much as an MBA graduate from a lower-ranked school. Of course, the expense of attending a top-ranked MBA School can be enormous (more than $100,000). Moreover, if students are taking a full-time course, they are sacrificing all the salary they can make in 2 years, and since the postgraduates can no longer enjoy student loans, the ratcheting debt can be troublesome for a long time. Not to mention the opportunity cost of forgone tax income from the last job, living expenditure, study documents, and travel, the MBA is a big financial investment that no one should take lightly.

Fortunately, nowadays, more and more companies appreciate people with personal experiences such as critical thinking or problem-solving skills rather than owning an advanced degree. Nowadays, people can easily learn some practical, high-valued business skills through free online courses, interacting with colleagues, or participating in conferences and online forums. Next, pursuing an MBA program is time-consuming and requires a huge commitment, and if students cannot get into a top-ten business school, it is most likely that they are going to waste their time and gain nothing from the investment.

The most effective way to pursue an MBA is to take a full-time course. It means that people have to devote to the program fully and it should consume all of their attention. The course can involve long-distance relationships with friends and family, and since students have to dedicate their time to the coursework, it is hard to keep in touch. However, people can take a part-time MBA program at some schools and still continue working full-time, the problem is it would probably take them five years to finish the course. Apart from the working hours, the rest of their free time will most likely be spent to study. It is going to be very stressful, but then again, an MBA is just not for them if sacrifices are not ready to be made. Lastly, an MBA is no longer exclusive in recent times, which means the competitiveness for an MBA working position just got a lot more intense. Earlier in the 1990s, MBA graduates only had to compete with peers from a few other MBA-offered schools.

Today, most universities offer the degree and provide full-time and even part-time programs. Ironically, many companies are now paying less and hiring fewer MBA workers because they can employ many talented and experienced workers without an MBA cheaper and with equivalent performance. There is a harsh reality that big employers only monitor MBA graduates from a few top-ranked or selected schools. Hence, students from lower tire MBA School are finding it harder to find a job at big companies. Worse, the degree can be an obstacle when employers fail MBA candidates, saying they are “overqualified” for the job. In times when the economy is weak, companies want low-risk employers who are satisfied with their entry wages and willing to stay for a long period. It is not farfetched to say that the value of an MBA will soon decrease and become obsolete. Pursuing an MBA degree is a complex decision that requires lots of considerations. If students cannot get into the top-ranked business school, it is better not to bother because otherwise, the return on investment will most likely not be there. But if they have the capability, owning an MBA will provide them very a promising future career since everything about the program is worthwhile. Getting an MBA, on the one hand, brings advantages as it helps graduates extend career opportunities, construct professional networks, and make substantial income; but on the other hand, it also brings them significant financial obligations, many personal sacrifices, and a competitive working environment.

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Overview of StellarFi

Key features of stellarfi, stellarfi credit builder pros and cons.

  • How StellarFi Compares

Who Is StellarFi Credit Builder For?

Stellarfi review: features, pricing, and user feedback.

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Like it or not, modern Americans are increasingly defined by their credit score — despite the paradox that getting credit often requires having credit.

Adding to the already confusing equation is the fact that credit scores among marginalized groups — from immigrants and low-income individuals to BIPOC Americans and those who identify as LGBTQ — are statistically lower, which leads to disparities that can be difficult to overcome via traditional credit-building methods. 

StellarFi offers a solution for accessing credit based on paying monthly bills. Read our StellarFi review to determine if this service fits your financial needs.

StellarFi StellarFi Lite

$4.99 per month

  • Check mark icon A check mark. It indicates a confirmation of your intended interaction. Tri-bureau reporting
  • Check mark icon A check mark. It indicates a confirmation of your intended interaction. Dynamic score projections for reporting with StellarFi
  • con icon Two crossed lines that form an 'X'. Only reports up to $500 of monthly bills
  • con icon Two crossed lines that form an 'X'. No free trials
  • con icon Two crossed lines that form an 'X'. No mobile app

StellarFi offers a solution for accessing credit based on paying monthly bills. With tri-bureau reporting and competitive pricing, StellarFi is one of the best rent and utility reporting services on the market.

Since 2021, StellarFi has been helping individuals improve their credit scores by paying their bills. In fact, the company (founded as a Public Benefit Corporation) is mission-driven to disrupt the poverty cycle by enabling financial equity through credit building. 

Introduction to StellarFi

StellarFi helps individuals build their credit by doing something we all have to do anyway: pay monthly bills. Most credit bureaus are on the lookout for consistent, on-time payments and proper credit usage — both of which StellarFi reports (after "paying" your bills via their virtual credit card connected to your personal bank account) — to all three of the major credit bureaus each month. 

Consumers in all 50 states can build credit quickly by paying their monthly bills — from cell phones and streaming services to utilities and rent — regularly and on time. In addition to affordable membership rates, the company boasts zero minimum income requirements, credit checks, interest, or deposits. 

While rent and utilities reporting services usually work as the middleman, chaperoning the payment information from its source to the credit bureaus, StellarFi operates a little differently. StellarFi actually pays off your bills on your behalf, then you pay the company back. 

Unfortunately, this does mean that if you cannot make a payment, StellarFi will report your missed payments to the credit bureaus as delinquent, undermining any efforts to build credit. This also means those reported payments on your credit report are shown as one tradeline under StellarFi instead of multiple different accounts. If you aren't confident that you can pay your monthly bills on time, StellarFi probably isn't the best service for you.

User reviews and ratings

StellarFi has been reviewed favorably by its customers, receiving an average of 4.5 stars out of 5 in over 59 reviews on its Trustpilot page. It also sports fairly responsive customer support, featuring live agents reachable on StellarFi's website.

StellarFi currently offers two membership tiers — lite and prime — with a third coming soon. The two currently available memberships cap monthly bill reporting at $500 and $25,000 respectively. As a result, lite is more of a utilities reporting service while premium has a high enough cap for rent reporting .

Both plans offer tri-bureau reporting, meaning it reports payments to the three major credit bureaus that supply potential creditors with your credit report. This is a crucial feature for a rent reporting service, but it's surprisingly absent from many of them. 

StellarFi offers two memberships, with a third coming soon, for different credit-building needs: 

Lite ($4.99 per month) helps individuals with less than $500 in total monthly bills build credit quickly and effortlessly.

Prime ($9.99 per month) helps individuals automatically build credit even faster by reporting up to $25,000 in total monthly bills.

Premium ($19.99 per month) is coming soon as a means of automatically building credit with all monthly bills and the added convenience of flexible payment dates and ACH transfer.

Unlike others in the industry, StellarFi offers neither quick fixes nor hidden gimmicks. It offers a holistic, long-term approach to getting consumers' credit back on track. 

StellarFi Credit Builder Pros 

  • Tri-bureau reporting: StellarFi offers payment reporting to all three credit bureaus on all plans. This is of the most important aspects of a credit builder product, but is surprisingly uncommon.
  • One-on-one live credit coaching:  Members of all tiers gain access to a credit coach. 
  • 30-day free trial:  Only offered for the Prime tier, StellarFi offers a 30-day free trial to users, which automatically rolls into its full-price premium plan when it ends.

StellarFi Credit Builder Cons

  • No retroactive reporting:   Some rent and utilities reporting services can report up to 24 months of payment history prior to signing up. Unfortunately, StellarFi does not have this feature.
  • Potential to miss payments: Most rent reporting services are just reporting payments made to your landlord, while StellarFi is paying your landlord and expecting payments in return. This means that when you cannot pay your rent, what that actually means is you cannot pay StellarFi back — and StellarFi will report that to the credit bureaus. This may result in a delinquency on your credit report, dropping your credit score .

How StellarFi Compares to Its Competition

StellarFi holds its own against the best rent reporting services, reporting to all three credit bureaus at an affordable rate. That said, StellarFi's method of reporting rent opens its users up to issues that other rent reporting services do not, which is the possibility of missed payments that can result in credit-injuring delinquencies. 

Here's how StellarFi stacks up against its competition:

CompanyPrice
StellarFi Prime$9.99 per month
Boom Pay$10 setup and $3 per month
Self Credit Reporting$0-$6.95 monthly + optional $49.95 fee for retroactive reporting
RentReporters$94.95 one-time fee + $9.95 monthly or $94.50 annually

StellarFi was designed for individuals — in particular those from marginalized groups — who have struggled to access credit or increase their access to credit as a means of establishing and growing credit over time. Its membership plans are also suitable for those individuals whose credit history needs to be repaired. No credit score is needed to sign up; all that's required is your name; email address, bank account, routing number, and Social Security number. 

While this is a great way for people without prior credit history to build credit with transactions they're already making, it's a risky product for people who aren't sure if they can pay all their utilities and rent consistently, as missing a payment can result in a delinquency. If you can't reliably cover your monthly costs, you may need to find a different rent reporting service.

StellarFi Credit Builder Frequently Asked Questions (FAQ)

StellarFi can increase your credit score by targeting the two most crucial credit-building factors: payment history and credit utilization . By reporting a higher credit limit, StellarFi optimizes your credit usage (which can reduce your credit utilization) and increase your credit score — which may jump as soon as the StellarFi account is added to your credit report. 

StellarFi helps with budgeting by providing comprehensive budgeting tools and real-time financial monitoring to assist users.

StellarFi ensures your account is secure by using advanced security measures to protect the user. 

You can contact StellarFi customer service by email at [email protected] or on the StellarFi Support website.

student loans pros and cons essay

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student loans pros and cons essay

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President Biden holding out a phone for a selfie in a large room, wearing a navy suit and blue and red striped tie. The American flag is reflected in his aviator sunglasses. Three women crowd behind him for the photo, also wearing aviator sunglasses.

Joe Biden: The Old-School Politician in a New-School Era

After more than half a century in Washington, President Biden has learned to make deals and work across the aisle. But that instinct is rarely rewarded in today’s political climate.

President Biden takes a selfie with members of the crowd in Nashua, N.H., in May. The president is fond of working the rope line. Credit... Haiyun Jiang for The New York Times

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Peter Baker

By Peter Baker

Peter Baker, the chief White House correspondent, has covered the past five presidents and written multiple books on the presidency.

  • Published June 26, 2024 Updated June 27, 2024, 7:59 a.m. ET

President Biden was peeved. What was Chuck Schumer thinking?

The Democrats had just temporarily averted a national default with Republican aid but still needed a broader deal to resolve a debt ceiling clash. Yet there was Mr. Schumer, the Senate Democratic leader, on the floor bashing Republicans for playing “a dangerous and risky partisan game.”

Mr. Biden called Mr. Schumer to chide him. That was not helpful, the president said, according to an official informed about the call, which came late in Mr. Biden’s first year in office. Senator Mitch McConnell, the Republican leader, had backed down to help avoid a fiscal crisis. They should not rub his nose in it. Mr. Schumer pushed back. “You don’t know how much he’s been beating up on me,” he told the president.

The Joe Biden who will defend his presidency at a nationally televised debate on Thursday night remains a practitioner of old-school politics in a new-school era. The hostility, the anger, the polarization, the “beating up” that define today’s national debate, yes, he knows all about that.

But after more than half a century in Washington, he still has the instincts of a backslapping cloakroom pol, eager to make deals and work across the aisle where possible at a time when that rarely seems rewarded anymore.

In some ways, it has been a formula for success that upended expectations, resulting in a raft of landmark liberal programs that will mark Mr. Biden in the history books as one of the most prolific legislative masters since Lyndon B. Johnson. And yet it has not been a formula for executing the most essential mission that he assigned himself when he took office: healing a broken country riven by profound economic, ideological, cultural, political and geographic divisions.

No president in American history took the oath with more experience in public office than Mr. Biden, 81, who was first elected to the Senate in 1972, when two-thirds of today’s Americans were not even born. But the politics of 2024 are a far cry from those of the 1970s, 1980s, 1990s, 2000s or even 2010s. While building a new bridge or lowering the cost of insulin still matters, it only penetrates so far with the electorate in an era of tribal animosity, populist unrest and social media disinformation.

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