15 Reasons Why Forgiving Student Loan Debt is a Bad Idea

The Department of Education’s latest student loan forgiveness program has made headlines, wiping out a staggering $168.5 billion in debt for 4.8 million borrowers—that’s nearly 1 in 10 Americans with student loans.1 

This move has ignited a fierce debate about the fairness and long-term consequences of such widespread debt forgiveness. 

Here are some key arguments against forgiving student loan debt. 

1. Moral Hazard & Personal Responsibility

15 Reasons Why Forgiving Student Loan Debt is a Bad Idea » man counting money ss2286004197
Image Credit: OlhaTsiplyar/Shutterstock.

Forgiving student loans could create a moral hazard, where future borrowers might take on excessive debt expecting it to be forgiven later. It also undermines the principle of personal responsibility for financial decisions.

Students should be held accountable for their choices, including the decision to take on debt for their education.

2. Unfairness to Those Who Paid Off Their Loans

15 Reasons Why Forgiving Student Loan Debt is a Bad Idea » hoa angry at family ss662534413
Image Credit: Antonio Guillem/Shutterstock.

Forgiving student loans would be unfair to those who have already responsibly paid off their loans or chose not to go to college due to cost concerns.

These individuals made sacrifices and should not be penalized for their responsible financial behavior.

3. Cost to Taxpayers

15 Reasons Why Forgiving Student Loan Debt is a Bad Idea » taxes s2305919067
Image Credit: Elnur/Shutterstock.

Forgiving student loans would shift the burden onto taxpayers, many of whom did not attend college or have already paid off their own loans.

This could lead to increased taxes or cuts in other government programs, potentially harming those who would not directly benefit from the forgiveness.

4. Inflationary Concerns

15 Reasons Why Forgiving Student Loan Debt is a Bad Idea » inflation ss1980000383
Image Credit: Denys Kurbatov/Shutterstock

Injecting a large sum of money into the economy through loan forgiveness could contribute to inflation, devaluing the currency and increasing the cost of goods and services for everyone.

This could disproportionately affect low-income households, who are more vulnerable to the negative effects of inflation.

5. Misdirected Benefits

15 Reasons Why Forgiving Student Loan Debt is a Bad Idea » teen money s2261567395
Image Credit: Viorel Kurnosov/ShutterStock.

A significant portion of student loan debt is held by high-income earners with advanced degrees, who are likely to earn higher salaries and repay their loans over time.

Forgiving this debt would primarily benefit those who are already financially well-off, rather than those struggling the most.

6. Doesn’t Address Root Causes of High Tuition

15 Reasons Why Forgiving Student Loan Debt is a Bad Idea » school ss590214395
Image Credit: giedre vaitekune/Shutterstock.

Forgiving student loans does not address the underlying issue of rising tuition costs. Instead, it could encourage colleges to continue increasing tuition, knowing that students expect debt relief.

7. Inequitable Distribution

15 Reasons Why Forgiving Student Loan Debt is a Bad Idea » drowning in money ss1733285270
Image Credit: d_odin/Shutterstock.

The benefits of loan forgiveness would not be evenly distributed among all borrowers.

Those with higher balances or those who attended more expensive schools would benefit disproportionately, while those with smaller balances or who attended less expensive schools would receive less relief.

8. Potential Negative Impact on Credit Scores

15 Reasons Why Forgiving Student Loan Debt is a Bad Idea » credit score dp71694831
Image Credit: Rawpixel/Deposit Photos

While the immediate impact of loan forgiveness on credit scores is unclear, there is a possibility that it could negatively affect borrowers’ credit history.

This is because closing a loan account with a positive payment history could reduce the average age of a borrower’s credit accounts and potentially lower their credit score.

9. Negative Impact on Financial Responsibility Education

15 Reasons Why Forgiving Student Loan Debt is a Bad Idea » opening wallet money ss2093260351
Image Credit: fizkes/Shutterstock

Forgiving student loan debt could send a message that financial decisions lack consequences, discouraging students from learning important lessons about budgeting, responsible borrowing, and the value of education.

10. Weakened Loan Programs & Future Access

15 Reasons Why Forgiving Student Loan Debt is a Bad Idea » student loan ss191156648
Image Credit: karen roach/Shutterstock

If the government forgives existing loans, it could undermine the financial stability of federal loan programs, making it harder for future students to access affordable loans.

This could limit educational opportunities for those who need financial assistance the most.

11. Administrative Challenges & Implementation Costs

15 Reasons Why Forgiving Student Loan Debt is a Bad Idea » student loan ss1765318430
Image Credit: Andrey_Popov/Shutterstock.

Identifying eligible borrowers, verifying their debts, and processing forgiveness applications would require significant administrative resources and incur substantial costs.

These resources could be better utilized for other educational or social programs.

12. Reduced Incentives for Refinancing & Income-Driven Repayment Plans

15 Reasons Why Forgiving Student Loan Debt is a Bad Idea » crack down predatory loan ss1912680556
Image Credit: CrizzyStudio/Shutterstock

If borrowers expect their loans to be forgiven, they may be less likely to seek out lower interest rates through refinancing or participate in income-driven repayment plans, which could ultimately cost taxpayers more in the long run.

13. Unintended Consequences for Private Loan Borrowers

15 Reasons Why Forgiving Student Loan Debt is a Bad Idea » predatory loan ss1414582541
Image Credit: ADragan/Shutterstock

While the focus is often on federal student loans, forgiving only these loans could create an uneven playing field for borrowers with private loans.

This could lead to resentment and demands for similar relief for private borrowers, further complicating the issue.

14. Disincentive for Future Savings

15 Reasons Why Forgiving Student Loan Debt is a Bad Idea » student loan ss1043563285
Image Credit: ITTIGallery/Shutterstock

If students anticipate future loan forgiveness, they might be less inclined to save for their education or explore alternative funding options, such as scholarships or grants.

This could perpetuate a cycle of reliance on debt for education.

15. Alternative Solutions Overlooked

15 Reasons Why Forgiving Student Loan Debt is a Bad Idea » people working at office dp101102108
Image Credit: Rawpixel/Deposit Photos

Instead of blanket forgiveness, policymakers could focus on more targeted solutions, such as expanding income-driven repayment plans, improving financial literacy education, and addressing the root causes of rising tuition costs. 

Source:

  1. U.S. Department of Education
Martha A. Lavallie
Martha A. Lavallie
Author & Editor | + posts

Martha is a journalist with close to a decade of experience in uncovering and reporting on the most compelling stories of our time. Passionate about staying ahead of the curve, she specializes in shedding light on trending topics and captivating global narratives. Her insightful articles have garnered acclaim, making her a trusted voice in today's dynamic media landscape.