Warren is proposing forgiving up to $50,000 in loans for most people, while Sanders says he would wipe out student loan debt altogether. The plans, however, ultimately cost more than $1 trillion, making them a tough sell legislatively. But the upsides to the economy could be significant because many young adults are now making major life choices based on their student debt burden. That includes whether to have children, buy a house, or maybe open a business.
The National Association of Realtors (NAR) conducted a survey revealing that people are postponing buying a home by as much as five to seven years based on their student debt. Short term, NAR economist Lawrence Yun says a broad student loan forgiveness program would be “very positive for the housing market.”
William Foster, vice president at the financial services firm Moody’s, agrees, adding that it’s not just the housing market that stands to benefit. Total forgiveness could result in U.S. real GDP getting a bump of $86 billion to $108 billion per year, on average. That’s “quite a bit,” he adds. But Foster says even a plan that cut student loan debt significantly without entirely eradicating it would significantly benefit the economy and serve as a buffer to growing income inequality.
“Student loans are now contributing to what’s perceived as lower economic prospects for younger Americans,” Foster says. According to Yun, for instance, “A typical homeowner has net worth about $230,000, while a typical renter has only $5,000.” So delaying home ownership is costing young adults the ability to build equity over time, which will perpetually set them behind over their lifetimes.
Jesus: Hey, Dad? God: Yes, Son? Jesus: Western civilization followed me home. Can I keep it? God: Certainly not! And put it down this minute--you don't know where it's been! Tom Robbins in Another Roadside Attraction