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Blog » Personal Finance » Student Loan Forgiveness is a Myth: Here is Everything You Need to Know Today

Student Loan Forgiveness is a Myth: Here is Everything You Need to Know Today

Student Loan Forgiveness Myth

In most cases, private student loan forgiveness doesn’t exist. Although it may sound morbid, certain private lenders will forgive your loan balance if you die or are permanently disabled. In contrast, income-driven repayment plans and other federal student loan forgiveness programs allow you to partially or fully forgive federal student loans.

Even so, President Biden’s student loan forgiveness plan has raised a lot of controversy recently. On the one hand, in times of financial difficulty, it may seem necessary to assist borrowers. However, some people feel they are being unfairly treated because they did not go to college — some because it was too costly to attend the university — so why should they pay for your loan? You borrowed the money, not someone else. Many others got busy and paid off their student loans.

Regardless, the Supreme Court will decide President Joe Biden’s plan to cancel up to $20,000 in student debt. As a result, students will find out whether they’ll be able to resume payments this fall with a reduction in their balances — or if they’ll have no relief from their debt this fall.

Arguments against student loan forgiveness.

Generally, student loan forgiveness has been opposed on the grounds of:

  • Fairness. People who have already paid off their student loans or who did not attend college because of the cost in the first place are unfairly penalized. In essence, these people would be subsidizing other people’s loans.
  • Incentives. With the possibility of student loan forgiveness, colleges may increase tuition prices because they know that the government will eventually forgive their debts. As a result, students would have a harder time affording college in the future.
  • Cost. Forgiveness of student loans is a costly government program. According to the Congressional Budget Office, Joe Biden’s plan to cancel federal student loan debt up to $20,000 would cost about $400 billion. However, the Penn-Wharton Budget Model estimates that forgiving federal college student loan debt over the next ten years will cost $300 billion to $980 billion. More than 60 percent of the debt is held by borrowers with high incomes.

Arguments in favor of student loan forgiveness.

The following principles are generally used to defend student loan forgiveness:

  • Relief. In the current economic climate, student loan forgiveness would provide much-needed relief to borrowers who are struggling to repay their loans. It may help them improve their financial health and allow them to focus on other financial goals, such as saving for retirement or buying a home.
  • Economic Growth. If student loans were forgiven, borrowers would have more disposable income to spend on goods and services, boosting the economy. As a result, demand would increase and jobs would be created.
  • Equality. By forgiving student loans, socioeconomic backgrounds would be equalized. When it comes to repaying their loans, students who come from families who can’t afford to help them pay for college are often at a disadvantage.

With that said, in this article, we examine the complexities surrounding student loan forgiveness and offer insight as to why it isn’t as viable as it seems.

There is no guarantee that student loans will be forgiven.

Typically, the thought process when trying to pay for college goes like this: I’m desperate. I need to take out loans to go to school because that’s the only way I’ll be able to afford it. But it’s cool—I can get them forgiven later, Kristina Ellis writes for Ramsey Solutions.

Unfortunately, it isn’t that simple. The government is always going to disappoint — or at least confuse — you at some point.

Even if President Biden’s plan goes through, certain borrowers will only see a portion of their federal student loan debt forgiven. It may offer some relief, but it won’t solve most people’s problems. How about those who owe more than $20,000 in loans? Can private student loans be repaid? Getting forgiveness like this isn’t something you can expect to happen multiple times, Ellis explains.

Additionally, applying for student loan forgiveness traditionally involves a lot of fine print and is constantly changing, so the process is complicated. The truth is that way too many people spend ten years working in low-paying public service jobs merely to find out that they’re not eligible for loan forgiveness.

It has even happened that forgiveness has been granted, but then a denial letter is received afterward. Ultimately, they were only able to restructure their loans by suing the Department of Education.

Remember, your student loan lenders won’t help you out of the goodness of their hearts, adds Ellis. In reality, they’ll do anything to keep you in that system, including changing the requirements for forgiveness at will.

Most student loans aren’t forgiven.

“Loan forgiveness” is often sought by borrowers who can’t make payments, but the possibilities are few:

Impact on the economy.

The adverse economic implications of student loan forgiveness are one of the main reasons why it is a myth. To forgive all outstanding student loans, which currently amount to trillions of dollars, the government would have to pay.

The consequences of such a huge financial burden may strain the economy, causing tax increases, funding cuts, or even further national debt accumulation. At the end of the day, this could cause harm to the very persons it is supposed to help.

It is morally hazardous.

According to advocates, forgiveness of student loans would encourage students to take on even more debt, knowing they will eventually be forgiven. Students’ debt could rise continuously, increasing taxpayers’ burden and creating a moral hazard.

In addition, this might discourage students from making informed financial and educational decisions.

Non-borrowers are unfairly treated.

Forgiveness of student loans benefits borrowers primarily, leaving out non-borrowers who may have chosen a different path. It raises questions of fairness to provide financial relief exclusively to those with student loans.

Many people have worked multiple jobs, attended community colleges, or enrolled in less expensive institutions in order to avoid or pay off their debts. By granting blanket forgiveness, these responsible choices are not acknowledged.

An effective and targeted approach.

Furthermore, student loan forgiveness can be effective in addressing the underlying causes of student debt. This issue is primarily caused by rising tuition costs, financial literacy issues, and easy credit availability.

In other words, forgiveness alone does not address these fundamental issues. To achieve long-term solutions and improve access to affordable education, a more comprehensive approach is needed.

The impact on higher education.

Universities may suffer unintended consequences if student loans are forgiven. If colleges and universities are assured of loan forgiveness, there may be little incentive to cut costs or make education more affordable.

Without market pressure, rising tuition fees could persist, exacerbating the student debt crisis.

What the future holds for student loan forgiveness.

It is uncertain what the future holds for student loan forgiveness. No program to forgive student loans is guaranteed. For years to come, the issue is expected to remain a hot topic of discussion.

It is likely that student loan forgiveness will only benefit a small group of borrowers if implemented. The program could target public sector workers or borrowers with certain income levels, for instance.

There is also the possibility of student loan forgiveness as part of a package of reforms to the student loan system. For college to be more affordable, tuition costs may be reduced or financial aid may be increased.

There is no way to predict whether student loans will be forgiven in the future. However, this is a complex issue that can’t be solved easily. In order to make the right decision regarding student loan forgiveness, one must carefully consider all the arguments for and against it.


What are the different types of student loans?

Generally, there are two types of student loans: federal loans and private loans. Private student loans are issued by banks or other financial institutions, while federal student loans are issued by the government.

What are the different repayment plans available for student loans?

In addition to standard repayment plans, graduated repayment plans, extended repayment plans, and income-driven repayment plans are also available. It depends on your income, your debt load, and your financial goals what repayment plan you should choose.

What are the different forgiveness programs available for student loans?

Student loans can be forgiven through several different programs, including the public service loan forgiveness program, the teacher loan forgiveness program, and the Perkins loan forgiveness program. In order to find out which forgiveness programs are available to you, you will need to research each program’s requirements.

Do student loans affect your credit score?

It is true that student loans affect your credit score. In the future, getting approved for loans or credit cards may be more difficult if you default on your student loans or make late payments.

How can I get help with my student loans?

There are several resources available to you if you are having trouble repaying your student loans. Depending on your situation, you may need to speak with a financial advisor, a student loan counselor, or the National Student Loan Data System (NSLDS).

Featured Image Credit: Cottonbros Studio; Pexels; Thank you!

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Managing Editor
Deanna Ritchie is a managing editor at Due. She has a degree in English Literature. She has written 2000+ articles on getting out of debt and mastering your finances. She has edited over 60,000 articles in her life. She has a passion for helping writers inspire others through their words. Deanna has also been an editor at Entrepreneur Magazine and ReadWrite.

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