In 2020, the current Student Loan Debt is at a high of around 1.6 Trillion USD. Some electoral candidates for 2020 elections have promised the US citizens that they will cancel the Student Loan Debts. While this may sound like a dream come true for the 45 million Student Loan Borrowers, it may never really happen, due to a slew of reasons that we will explore in this article.
Even though the issues mentioned below may seem unrelated to loan cancellation, Student Loan Debt cancellation cannot come to fruition without dealing with these issues first. Although the President of the United States can make significant changes to Student Loans, the high cost of college for current and future students will still be a hindrance on the path to canceling student debt for the existing students.
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Handling the Cost of College Before Forgiveness
Glancing closely at the plans for Student Loan Cancelation, we can see that the plans propose free public college in addition to debt cancellation. Free college is an essential part of debt forgiveness, as long as it is implemented at the same time or before student debt cancellation.
There is a fairly simple reason behind this timing, where forgiving massive amounts of student loans without any address to the cost of college will create a moral hazard, which is an economic term used to describe what occurs when someone has an incentive to take risks that will have to be paid for by others. Forgiving current student loans will set a precedent wherein future students will also expect their loans to eventually be forgiven. This, in turn, will have a domino effect, leading to an increase in borrowing and eventually leading to the price of college education escalating to an even higher limit. Therefore, if loan cancellation comes without free public education, the student loan debt crisis will not be fixed, rather it would only be repaired, temporarily, with a newer and even worse crisis on the way after it.
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The Matter of Free Public College
The reason for a free public college program being set up before the student loans are canceled is of paramount importance because it declares a boundary that will unfurl all current and future students, providing every student with the option to have a free public education. If students are provided with this opportunity, they would not have any reason to expect that their student loans should be forgiven otherwise, if they have decided to go with another educational institute. This free public option would also provide all Americans with access to a free four-year degree, helping the federal government get out of undergrad lending entirely. Such a free education option is also likely to reduce the price of expensive private schools that are forced to compete with state schools. To explain in plain words, free college programs would eliminate the moral hazard we have discussed above.
The Hurdles Lying Ahead
Developing a higher education system with free public college will not be an easy feat. It might essentially be even more difficult than forgiving the existing student loans.
One of the biggest difficulties will be creating a funding system that will serve the federal government, the states, as well as the public schools.
Not to mention, the fundings for such a program will be extremely expensive and provide little to no immediate benefit. Such investments provide benefits over the long term.
And ultimately, developing a free public college program will require legislation getting through congress.
Looking at these issues, we can definitely argue that free public education will not be an easy road to walk on.
The Final Takeaway
The loudest voices advocating for student loan debt cancellation should be those of the student loan borrowers. It is really difficult to imagine a student loan debt cancellation program being set up without any adverse effects unless free public college programs are devised and set up at the same time or before the debt cancellation goes through. Though one should always keep in mind that many achievements have been made in spite of hurdles. It is necessary to have hopes but it is also equally important to be realistic, and right now, student loan debt cancellation does not seem viable without some other programs being set up first. But there is one way to reduce your student loan-related stress which is viable right now, and that is Refinancing your student loans. Interested and want to learn more? Check out the Best Companies To Refinance Your Student Loans.