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Student Loan Forgiveness: Necessary Relief or Big Government Boondoggle?

August 09, 2022

In late June, President Biden told reporters that he was “nearing a decision on student loan forgiveness.” With interest on student loans to resume after August 31st, the administration is facing increasing pressure to act. What are the implications of student debt cancelation? Is it a necessary correction in response to the dramatic rise in tuition over recent decades or a wasteful subsidy incentivizing the universities to further raise tuition and creating an unfair reward structure for already upwardly mobile college graduates? Will it stimulate the economy, as Elizabeth Warren argues, or unleash entrepreneurship, per Janet Yellen?Here are some free market perspectives to shed light on these questions: 

  • MI senior fellow James Piereson and AEI senior fellow Naomi Schaefer Riley outline in a recent City Journal article that student debt is not as severe as many think, and that borrowers’ sentiments on the debt burden varies based on degree and career satisfaction. 
  • Lindsey M. Burke, director of the Heritage Foundation’s center for education policy, explains that canceling student loans could increase tuition and harm low-income earners the most. 
  • Steven Taylor, senior fellow at Stand Together, argues in a RealClearEducation article that policy makers need to "use the current student loan crisis to build a more just, more equitable, and more stable student financing system." 
  • Emma Camp of Reason Magazine argues that the federal government needs to get out of the student loan business altogether. She notes that “low standards for federal funding incentivize the creation of schools whose sole mission is to collect federal loan money.”

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