I recently got into a Twitter debate about student loans. One participant was rather adamant that I didn’t know what I was talking about. His point was that student loan forgiveness didn’t cost a penny.
He said the loans were held by the Department of Education and not the Treasure and therefore the cost was zero to forgive loans.
He further noted that was the trouble with conservatives – they didn’t know how government works. 🤑
Where did the money come from to grant the loans? Where do the interest payments go?
The cost of federal student loan programs is widely debated. The CBO provides different estimates based on low discount rates and “fair value” discount rates. Some fair value estimates suggest the government loses multi-billions per year, including administrative costs. But another recent report said that the CBO estimates that when 2021 results are finalized, student loan programs will have generated net receipts of $1.4 billion from loans and guarantees, while also incurring $3.2 billion in administrative costs, suggesting the total result is a small loss. Regardless of how the costs are calculated, the implications are the same: The government does not recoup the value of the loans, putting present and future taxpayers in the position of the guarantor.https://www.investopedia.com/articles/personal-finance/081216/who-actually-owns-student-loan-debt.asp
Where does forgiving student loans stand in term of federal spending or transfers if you like?