How Canceling Interest on Student Loans Will Help the Economy

Between the student loan debt crisis and the pandemic, the economy has taken a major hit in recent years. While businesses are starting to recover, Americans are still struggling with the financial effects of their decision to get an education that they made years ago. The cost to get an education shouldn’t make someone think twice about enrolling in college, and it should never be so high that it stops people from being able to make purchases that put money back into the U.S. financial system. Working together to get the government to offer zero-interest education loans supports economic growth that benefits everyone.

Add More High Wage Earners to the Workforce

On average, people who earn bachelor’s degrees have incomes that are approximately 84% higher than people with just a high school diploma. As a general rule, people with higher incomes also return more money to the state and federal governments by paying more in taxes. The extra tax revenue can then be allocated towards projects that increase the amount of job opportunities that are available to everyone, which further sparks economic growth.

Promote Business Growth With Greater Personal Spending

Owing large debt for their education is a major reason for someone to avoid making major purchases. In 2019, a survey conducted by personal finance company SoFi revealed that 61% of Millennials put off buying a new home because they still carried student debt. This same reaction also impacts other purchasing decisions. When someone has a large portion of their income allocated towards their debt obligations, they are more likely to tighten up their budget. Eliminating student loan interest rates is like giving borrowers an extra paycheck each month to spend and grow the economy.

Reduce Losses From Outstanding Debts

Sadly, there comes a point when some people just can’t pay their debts. Outstanding student loans slow economic growth at the federal level. Ending high student loan interest rates makes paying down debt more manageable. This allows borrowers to continue on their payment plan without having to request a forbearance or just stop paying completely.

Canceling all existing and future student loan debt may not be feasible right now, and even making the suggestion of doing so can generate controversy. Asking the government to cancel interest on student loans serves as a middle ground that more people can get behind. The bulk of the government’s investment in financial assistance for education will still get paid back. Yet the average student debt holder will benefit from having more money in their pocket to spend on major purchases that improve the economic status of our nation.