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Study: Cancelling Student Loan Debt Would Improve Economy

The average college graduate in South Dakota has $23,600 in loans upon graduation. (common dreams.org)
The average college graduate in South Dakota has $23,600 in loans upon graduation. (common dreams.org)
February 22, 2018

SIOUX FALLS, S.D. – Student loan debt in the U.S. has reached $1.4 trillion.

That's greater than all credit card debt and also eclipses all motor vehicle loans.

Researchers at the Levy Economics Institute of Bard College say canceling the debt would be a major boost to the economy.

Stephanie Kelton, the report's lead author, says 44 million Americans have outstanding loans, and many struggle to make payments or are in default.

She says canceling the debt would stimulate the economy because 44 million people would have an extra $300 to $1,000 in their pockets every month.

"All of these people who can't get out of their parents' basements and start their lives, buy their first home, buy a car, begin a family, have a child,” Kelton points out. “All of these things that we know student loan debt plays a part in holding back, people can now go out and do."

In 2017, South Dakota was among the top six states with the highest percentage of student debt, and the fourth highest number of student loan borrowers age 50 or older.

South Dakota also has some of the most punitive student loan default laws in the country.

Residents who default on a student loan can lose their driver's license, their license to work as a registered nurse, and be fired if they are a public school teacher.

Using two macroeconomic models, Kelton's team forecast the effects of debt cancellation over 10 years and found that clearing $1.4 trillion of debt could add as much as $2.5 trillion to the economy.

Kelton argues that the government doesn't actually need the dollars represented by student loans on its balance sheet, because it holds the monopoly on currency and can add more dollars whenever it wants.

She says taking on debt held by private banks would be a lot cheaper than the GOP's recent $1.5 trillion tax overhaul.

"But it turns out that if you actually cancel the student loan debt, you do more for the economy in terms of creating jobs and growing the economy, at about half the price tag," she states.

The group's projections showed that in addition to increasing national GDP, the move also would create more than 1.5 million new jobs annually, which would be more than half of all the jobs created after the Great Recession between 2010 and 2015.

Roz Brown, Public News Service - SD