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In today's US political climate, a big talking point for some of the Democratic Party candidates is the forgiveness of student loans. Whenever I hear this discussed among my peers, the consensus is that it can't happen because there would be no way to pay for it.

Today, I saw this article that states

Republican tax cuts cost more than forgiving student debt

The article references .gov sources regarding the tax cuts cost, so it seems at least somewhat legit. On the other hand, I don't see any sources referenced regarding the student loan balance, and even if that balance is correct, is the cost of "forgiveness" really the same as the total student loan debt?

In general, is the claim that forgiving student loans would be less expensive than the 2017 tax cuts accurate?

Brythan
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roger21
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    *even if that balance is correct, is the cost of "forgiveness" really the same as the total student loan debt?* - I'm not sure there's an objective answer to that. On the one hand, student loan debt is nondischargeable, meaning it cannot be eliminated in bankruptcy, so it's more valuable than "typical" unsecured debt. On the other hand, if the loanee is broke, you can't just magick the money into existence, bankruptcy or no bankruptcy. Maybe there are studies on this, but I can't imagine it's a straightforward question. – Kevin Jul 06 '19 at 23:41
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    When I read the article both numbers are referenced. Student loans come from the Federal Reserve, the other from the budget office. – redleo85 Jul 07 '19 at 08:25
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    Probably a better question for Economics.SE – Oddthinking Jul 07 '19 at 13:00
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    @Kevin - plus there are also, potentially, indirect economic benefits to young adults having money to either spend or save. – PoloHoleSet Jul 08 '19 at 15:59
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    Technically speaking, tax cuts don't cost *anything*. They have the unlikely potential to reduce government receipts, but that is not a ”cost” – warren Jul 12 '19 at 18:12

1 Answers1

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It's nebulous.

Total student loan debt is estimated at around $1.5 trillion Forbes, while NerdWallet places the total federal student loan debt at $1.4 trillion (and puts the total at $1.6 trillion).

POLITICO estimates that the tax cuts will cost about $2.3 trillion over ten years, assuming that the cuts run that long. The additional revenue generated by the tax cuts over that period is estimated to range between $1 trillion and $1.3 trillion, so the "net" is that same $1 to $1.3 trillion range.

Thus there could probably be arguments either way, but at the very least the two figures are comparable.

Daniel R Hicks
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    Except that the forgiveness would be a lump payment, whereas the tax cut is spread over a decade. And presumably the forgiveness would be part of a larger subsidy of tuition, so it would continue to incur costs over those ten years. – Acccumulation Jul 07 '19 at 15:51
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    @Acccumulation - The details are pretty much speculation at this point. – Daniel R Hicks Jul 07 '19 at 18:30
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    And there does not seem to be any consideration of the Laffer curve. The tax cuts *might* actually bring more money into the government. –  Jul 08 '19 at 16:54
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    @puppetsock -- The "additional revenue" is the money that the tax cuts are expected to "produce". Most credible economists don't place much credence in the Laffer curve per se, but they do acknowledge that tax cuts can spur the economy to a degree. – Daniel R Hicks Jul 08 '19 at 17:06
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    @DanielRHicks LOL. Economists don't put crededence in the Laffer curve, while acknowledging that what it says will happen actually does. That's funny. –  Jul 08 '19 at 17:41
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    @puppetsock - There's never been any question that cutting taxes has a boosting effect for business (at least in the short run). But Laffer vastly overestimates this effect. (And if you want to discuss this topic further you should go to the Economics SE.) – Daniel R Hicks Jul 08 '19 at 18:03
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    @puppetsock The problem is that evidence suggests that we are already on the left side of the U-shaped Laffer curve: cutting taxes may help business, but taxes are not high enough that cutting taxes actually increases revenue. At the same time, cutting taxes can hurt by reducing government spending, which is interestingly not just burning money away but actually goes to things like paying salaries for teachers and construction workers. Politico's estimate accounts for the increased revenue: that's why they estimate the cost will be $1-1.3 tril rather than $2.3 tril. – Bryan Krause Jul 08 '19 at 18:05
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    @BryanKrause So, presuming you are correct (which is not in evidence) the "cost" might be a small fraction of the cuts. Also, Trump's cuts have been producing radical increases in employment. Which presumably cuts welfare and unemployment payments. Which almost certainly puts the net back in the positive. –  Jul 08 '19 at 20:25
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    @puppetsock - This discussion belongs on Economics SE, not Skeptics. – Daniel R Hicks Jul 08 '19 at 20:32
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    @puppetsock - Since this is Skeptics, I'm going to ask you for a source for that claim. Everything I've seen has said that the unemployment rate has been going down at about the same rate since 2012, but I'm open to discovering otherwise. – Bobson Jul 09 '19 at 11:39
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    @Bobson You want cites, we got cites. https://www.cnbc.com/2019/07/05/jobs-report-june-2019.html Fifty year low in unemployment. That's not "the same rate since 2012." https://www.cnbc.com/2018/12/07/black-unemployment-rate-falls-to-5point9percent-ties-record-low-hit-this-year.html Black unemployment ties record low hit previously under Trump. https://www.cnsnews.com/blog/craig-bannister/hispanic-employment-and-labor-force-participation-grow-june Hispanics also record low unemployment. –  Jul 09 '19 at 13:28
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    @puppetsock i think you misunderstood what I was asking for. If unemployment has been going down every year since 2012, then _of course_ it’s lower now than it has been in all that time, and it can easily be lower than ever before. But if it’s been going down by the same X% every year, then the tax cuts had no effect on it, but if it were X% before and (X+1)% since the cuts, then they _have_ been increasing employment. Please provide a source for the tax cuts reducing unemployment *compared to what was already happening*. – Bobson Jul 09 '19 at 17:22
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    @Bobson -- You and Puppet need to take this discussion to Economics SE. – Daniel R Hicks Jul 09 '19 at 22:29
  • @PoloHoleSet At some point you plan to introduce something besides assertions? –  Jul 22 '19 at 20:04
  • @PoloHoleSet - Take this to Economics SE!!! – Daniel R Hicks Jul 22 '19 at 20:22