Report: Student Loan Cancellation Most Effective If Targeted
The proposals to write off limited one-time amounts of student loan debt that have been launched by the White House and members of Congress do little to get to the heart of the $ 1.7 trillion problem, JPMorgan Chase Institute research find.
Why is this important: Rising student debt “is a financial crisis for millions of Americans,” JPMorgan Chase Institute co-chair Fiona Greig said in a statement.
- “Our analysis shows that targeting income-tested student loan cancellation would be more cost effective to channel aid to hardest-hit families whose circumstances make repayment difficult and who in some cases face a trap. long-term debt because of their education. . “
The big picture: “Any long-term solution to alleviating the burden of student debt is incomplete without addressing the underlying issues, such as rising tuition fees,” argues the research paper.
Between the lines: Previous studies by the institute have shown that younger, lower-income families are the most burdened by student loan payments and that low-income families are less likely to make consistent loan payments (44%) compared to high income families (63%).
A deeper level: Using administrative bank data and anonymous credit bureaus to estimate the benefits of canceling student loans, the institute found that “income thresholds dramatically reduce costs and make cancellation more gradual, although all the scenarios distribute the cancellation among borrowers by race in roughly the same way. “