A recent study (November 2014) by Ypulse, Price Waterhouse Coopers and Junior Achievement has some heads turning in that the study found that 24% of millennials said they expect their student loans will ultimately be forgiven by the government. That could be a lot of accumulated debt, considering the average amount of cumulative student debt for undergraduates in the class of 2012 was $26,885, according to a recent Pew Research report. The average debt for 2013 graduates is expected to be even higher.
Activist groups have been battling the student debt “crisis” as more of a wealth distribution factor; however millennial optimism might not be too far off base, according to the Consumer Financial Protection Bureau (CFPB), a watchdog agency set up after the financial crisis. It estimates that 25% of the U.S. workforce is employed by a public service employer and “many may be eligible for existing student loan repayment benefits, including Public Service Loan Forgiveness,” according to the CFPB website.
Student loan forgiveness may indeed be coming in the future. A growing chorus on the left has been calling for student loan forgiveness of one form or another. In fact, President Obama in June of 2014 signed a bill that moved to expand the Pay-As-You-Earn program which caps payments at 10 percent of discretionary spending (roughly your income minus the poverty line for your family size) and wipes out any debt remaining after 20 years (10 if you are employed by government or in public service). However, economists also have been predicting for years that the forgiveness of student loan debt would certainly be an avenue for economic growth in the U.S.
The alternative payment program that is getting some attention is also designed to help borrowers struggling under the weight of student loans. They include forgiveness programs for on-time payments and public-sector employees. Teachers can have their balance canceled after ten years, for example. Low-income borrowers can have their balance canceled after 20 or 25 years of on-time payments. Borrowers who don’t qualify for forgiveness but use a repayment program find their monthly payments reduced but spread out over a longer period of time. That means they will pay more over the lifetime of the loan, as there is additional time for interest to accrue.
However, new data suggests there really is no “crisis” at hand; rather, most student loan borrowers are likely to be paying less than 10 percent of their income already. Calls to reduce the payment burden of student loans are simply part of a larger movement to make more things in this country free. Income redistribution has been expanding rapidly as liberals invent new, creative ways to shift payment from the true customers onto somebody else. If they want to make a case for greater subsidies (and, therefore, income redistribution) in order to make college educations less expensive to those getting the education, experts say they need to make a better case for that.
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