Universal student debt relief is regressive, say economists – Reason.com


Paying off student loan debt for American college graduates would benefit the wealthy much more than less privileged studentssays a new working paper from the National Bureau of Economic Research. “Blacks and Hispanics would also benefit much less than the balance sheets suggest,” say the authors.

In the paper, titled “The Distributional Effects of Student Loan Forgiveness,” economists Sylvain Catherine and Constantine Yannelis conclude that universal student lending would “benefit the upper decile as much as the lower three deciles combined.”

Not all student loan programs would have the same impact, they note:

There are a number of ways to pay off debt, with important distributional implications. For example, forgiveness can be universal, limited, or targeted to specific borrowers. These debt relief policies can benefit various socio-economic and ethnic groups. In this article, their distribution effects are examined. We find that the benefits of universal debt relief largely flow to high-income borrowers, while relief through the expansion of income-related credit schemes instead benefits middle-income borrowers.

In the US, income-based payment plans and loan forgiveness programs already exist, the authors suggest.

However, total or partial loan waiver regardless of income and loan size would be “very regressive, with the vast majority of the benefits going to high-income individuals,” they conclude.

reasonMike Riggs offers some better ideas for student loan reform here.


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