President Joe Biden extended the pause on student-loan payments for a fourth time, through August 31.
I disagree with this decision because it isn’t needed at this moment. The majority of student loan debt is held by the wealthy and upper class. These pandemic pauses are indirectly benefiting people that do not need relief.
Per Marc Goldwein of the Committee for a Responsible Federal Budget, doctors and lawyers are getting most of the relief, while those with only bachelor’s and associate degrees are receiving crumbs.
This is not a good idea and an even worse idea is to completely forgive all student loan debt. At this time canceling all student loans would likely increase inflation, and that’s the last thing we need right now.
From Bloomberg:
For the past two years, more than 40 million borrowers have been allowed to forgo making their monthly payments. The vast majority made no payments at all during the pandemic, even though the government set interest rates at zero. This has already cost about $120 billion in lost revenue; the latest extension will cost at least $17 billion more.
I do not believe canceling all student loan debt would spur the economy. For those debtors living paycheck-to-paycheck, it would provide minor short-term relief at best for a much larger issue.
For the high earners who were regularly making payments before the pandemic, I see less logic in forgiving debt for those that have the money and resources to pay it back.
The system needs to change and certain people do need relief with student loan repayment. One simple solution I propose is allowing $1,200 of your student loans to be completely forgiven if you can volunteer 40 hours, which must be completed within 6 months.
The current estimated national value of each volunteer hour Is $28.54. 40 hours x 28.54 is 1,141.6 and you can round that up to 1,200.
My reasoning:
- Provides enough financial incentives and schedule flexibility for high earners and working professionals.
- Create a demand for volunteer work instead of the debtor getting a part-time job or delaying paying their student loans altogether.
- Something digestible that could be approved by Republicans and Democrats.
- Doesn’t take away from other forgiveness programs.
- Less rigid than government-supported programs like AmeriCorps and the Peace Corps.
- Attracts a diverse group of people into a variety of volunteer opportunities.
This is a simple one-time solution that creates immediate economic value and helps with the ongoing labor shortage. It can include more service-oriented volunteer work such as picking up trash or helping at a food bank. It also would be expanded to more freelance-type work like social media consulting, legal aid, tech support, etc. For the doctor or lawyer, this seems like a great opportunity to provide consultation work to residents of a retirement home or help Ukrainian refugees start the asylum process.
If this pilot program received high demand and had proven results, increasing production output in the economy, you can increase the number of hours you could volunteer to forgive your student loans. Overall, I see this as a major win for everyone involved. The number of quality hours produced through this program would outweigh the loss of revenue through canceling $1,200 in student loans.
Invest in Myself 