From 2006, the national student debt climbed from $500 billion to $1.7 trillion in 2020. The number of consumers who have fallen behind on their student loan payments has also increased over the years. Therefore, student loan forgiveness has been a topic of discussion. President Biden has made claims of passing legislation through an executive order to forgive up to $10,000 in federal student loans. However, many Democrats are pressuring him to increase this amount to $50,000. This would decrease the student loan debt from $1.7 trillion to 700 billion, and it would affect 36 million borrowers, erasing up to 80% of their student loan debt.
One of the arguments in favor of student loan forgiveness is it will stimulate the economy by freeing up millennials’ buying power they otherwise would not have because of their student loan payments. It also would provide relief to Black, Brown, women, and first-generation college graduates, demographics which are more likely to have more student debt than middle to upper class white borrowers. Not to mention, during COVID, 89% of borrowers chose to freeze making payments on their student loans. One argument against forgiving student loans is that it would not stimulate the economy because borrowers would put their leftover money from student loans into savings. There is also a growing sentiment that individuals who paid off their student loans would feel as if they were punished for their diligence.
Zero-Sum Bias is the belief that all resources are limited in supply. For example, when someone uses a resource or acquires a tangible object, people often perceive this as meaning there will be less for them, making their survival seem much more difficult than the other person’s.
Call to action
Those who argue that student loan forgiveness is unfair to those who already paid off their debt are participating in the Zero-Sum Bias phenomenon. Some experts say that canceling the student loan debt of $1.4 trillion would raise the GDP from about $86 billion to $108 billion a year. Canceling student loan debt means a borrower would have about $3,000 (or more) to spend annually, which would boost the economy. It is predicted that more individuals would consider starting businesses and more millennials would find a mortgage payment less daunting. A boosted economy means the people who paid off their student loans would still reap the benefits indirectly.
The majority of individuals who would benefit from student loan forgiveness are Black or Brown, low-income or first generation college graduates. These individuals face fighting the cycle of poverty and oppression due to systemic racism, requiring them to take on higher student loan debt in order to access upward mobility. Therefore, individuals who paid off their student loans had the ability to do so, whether they only had to take out smaller loans, had more money to pay them off post-grad, or both. It is not an equal comparison. Since they had the opportunity, they should also want others to have a chance of ridding themselves of student loan debt. Believing someone shouldn’t receive student loan forgiveness is equivalent to thinking someone who had COVID shouldn’t receive the vaccine. Simply because you “won” or achieved something, does not mean others need to “lose” so that you can benefit. With COVID severely impacting Americans’ financial lives, we need now more than ever for everyone to speak up in support of student loan forgiveness as one of the tactics of rebuilding our country’s economic well-being as well as to promote higher education accessibility.