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

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…