We all know that debt can lead to depression and substance abuse. There is currently $1.4 trillion of outstanding student loan debt in the US, held by 44 million people. Nearly 70% of college seniors left with some debt in 2015. Oftentimes they owe more than what they earn per year. according to a Bloomberg Global Data analysis of federal and private loans, student loans have seen almost 157 percent in cumulative growth over the last 11 years. By comparison, auto loan debt has grown 52 percent while mortgage and credit-card debt actually fell by about 1 percent.
Researchers looked into what would happen if the government canceled all federal loans and paid off all privately owned loans, a.k.a, student debt forgiveness. While you may assume that the biggest debts are held by graduate school students like doctors and lawyers, student debt is increasing as the cost of education has risen.
This may be a crazy solution to the student debt crisis, but one that needs to be taken seriously, considering the radical scope of the problem. Their economic models show that canceling student debt would lead to a boost in GDP by an average of $86 billion to $108 billion annually over the next 10 years. It also shows that it would reduce the unemployment rate by about 0.3%.
Julie Queler, advocate for student loan reform in the United States, believes that being able to reform and restructure student loans will benefit the disaffected. She wants to offer a scholarship to help alleviate some of that burden. Student Loan Reform and Restructuring is something that Julie believes should begin immediately. If more people become aware of the turmoil it causes, the sooner the United States government can take some action.
How much in student loan forgiveness can you receive?
This depends on the loan forgiveness program you apply to. Forgiveness programs are available for some federal loan borrowers. Those who work in the public sector may be eligible to have their remaining debt forgiven after 10 years of payments. You may even qualify for up to 100% loan forgiveness, depending on your case. Qualifying teachers receive a tax-exempt principal reduction of either $5,000 or $17,500 on their federal loans. And those enrolled in an income-driven repayment program may be eligible for debt forgiveness after 20 or 25 years.
Student loan forgiveness may not be free.
Under current student loan repayment plans, any remaining student loan balance at the end of your repayment period will be taxed as ordinary income tax on the amount forgiven. This means, your student loan debt is not completely forgiven, but exchanged for tax debt instead.
There is no guarantee that student loan forgiveness will continue.
Student debt comes down to the federal government paying for the student loan forgiveness. What that means is taxpayers could be at risk for paying for those unpaid student loans. And, some critics of debt cancellation worry that current and future borrowers would take advantage of it and borrow even more, and expect their debt to be forgiven, too. This could lead to pros and cons in whether it is a good option.
In the meantime, setting a goal for paying off student loans is a big step to paying off debt, and may help to alleviate stress and depression.