by Mike ‘Mish’ Shedlock
The subject of student loan debt cancellation keeps resurfacing. Let’s recap why it’s a bad idea starting with a new study by Wharton.
How Student Loan Forgiveness Could Increase Inequality
Wharton’s Sylvain Catherine and University of Chicago’s Constantine Yannelis explain How Student Loan Forgiveness Could Increase Inequality
Forgiveness of outstanding student loans has been a recurring theme in policy debates on the roughly $1.6 trillion in such debt that the U.S. government and private lenders hold. Calls for such forgiveness have increased now as the Joe Biden administration prepares to assume office.
However, partial or full student loan forgiveness is “regressive,” according to a recent working paper, titled “The Distributional Effects of Student Loan Forgiveness,” by Wharton finance professor Sylvain Catherine and Constantine Yannelis, professor of finance at the University of Chicago’s Booth School of Business. The paper’s findings are being actively discussed on Twitter.