Forgive student loans- it won’t cost a penny

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?

I thought that was amusing – well actually pathetic.

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?

https://www.brookings.edu/blog/up-front/2021/02/12/putting-student-loan-forgiveness-in-perspective-how-costly-is-it-and-who-benefits/

3 comments

  1. I have not looked at the graph comparing costs of loan forgiveness to other programs such as SSI or other like programs. It is an eye opener to see the proposed cost of forgiveness in relation to other programs. All this student loan debt under the guise of educating everyone to do what? Plumbing, carpentry, truck driver, and many more. No, we can’t have anyone doing substantial work.

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  2. I fear for the future of our country. There are liberal public “intellectuals” (i.e. Elizabeth Warren, Robert Reich) who espouse this garbage.

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  3. Here is the simple moron test on student loan money. If private banks could make money on student loans without risking their depositors and shareholder ‘s money, they would. If the loan servicing companies could make money, then why did two servicing the loans quite this year? Even if the Department of Education is some kind of financial branch of the US Government that “hold” loans, how were they funded without taxpayers?

    These are the same people who do not think that income taxes are so bad as long as the get a refund every year because they never look at their total tax bill and what they actually over paid.

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