“student Loan Forgiveness Proposals: Analyzing Policy Debates”

“student Loan Forgiveness Proposals: Analyzing Policy Debates” – First-generation Chapman students say that despite attending a private school, paying off their student loans is a huge struggle. Graphics by HARRY LADA, art director

When Saira Ramirez first transferred to Chapman University in the fall of 2019, she found herself working as a full-time employee at T-Mobile, helping her mother diagnosed with cancer, caring for her five siblings, and juggling a busy schedule. The first person in her family to attend college, Ramirez is proud of her accomplishments, but admitted it took her a while to find her footing.

“student Loan Forgiveness Proposals: Analyzing Policy Debates”

Burdened by the demands of the job and academic expectations, Ramirez eventually decided to quit her job. Despite already being on a $5,000 transfer scholarship and accepting Cal Grants and a Federal Pell Grant, Ramirez invested $20,000 from her 401(k) and sold her stock to pay for her education.

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“Even though we’re in a private school, it doesn’t mean we’re economically stronger,” Ramirez said. “We are really fighting. Many of us choose to go to a private institute not because we have money, but because it offers more resources and connections.”

Ramirez’s story mirrors that of millions of college students in the United States. In fact, there are currently 45 million borrowers in the country who cumulatively owe about $1.7 trillion in student loans. California, Florida, Texas and New York account for 30% of all student loan borrowers in the US.

President Joe Biden said at a CNN town hall on February 16 that he supports making community college free for all Americans and making four-year public universities free for families making less than $125,000 a year. However, he does not support student loan forgiveness for students who attend private “elite” universities such as Harvard University and Yale University. Students who attend Ivy League schools represent less than 0.5% of the 15 million college students in the United States.

While higher-income individuals are more likely to have student debt, students from higher-income households are more likely to attend college. But Jenisty Colon, a first-generation student and junior communication studies and English double major at Chapman, believes there is a misconception that everyone who attends a private university is rich and privileged.

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“There’s this perception, ‘Oh, you’re rich because you go to a private university,’ but they don’t know the loans I take out or how hard I work for scholarships,” Colon said. “There’s a stigma… We should fix that somehow.”

Progressives in the Democratic Party, such as Alexandria Ocasio-Cortez (D-NY), have rejected the notion that the type of university someone attends or their socioeconomic status should determine whether or not they qualify for student loan forgiveness.

“Who cares what school anyone went to,” Ocasio-Cortez tweeted on February 16. This is wrong.”

1. Who cares what school anyone went to? Generations of working-class children have been encouraged to take on more debt under the guise of elitism. This is incorrect. 2. Nowhere does it say we need to trade early childhood education for student loan forgiveness. We can have both. https://t.co/5oPKeMfV3r — Alexandria Ocasio-Cortez (@AOC) February 17, 2021

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Biden also received pressure to forgive more student loans. Senate Majority Leader Chuck Schumer (D-NY), Rep. Ayanna Pressley (D-MA) and Sen. Elizabeth Warren (D-MA) called on Biden to forgive $50,000 in student loans for borrowers, as opposed to Biden’s plan to forgive up to $10,000. Biden is adamant that he will not consider the $50,000 offer.

But advocates say more loan forgiveness would address racial and gender wealth gaps and further reduce borrowers’ financial stress. Black and African-American college graduates owe an average of $25,000 more on student loans than white college graduates, according to data from EducationData.org. According to the American Association of University Women, about $929 billion in student loans belong to women, who own two-thirds of all student loan debt.

Last year, Chapman offered $120 million in financial aid to students, with 80% of undergraduates receiving some form of aid. The average cost for the fall 2020 semester was $28,000 per student. Colon also credits the Promising Futures program and the Marian Wright Edelman First Generation Endowed Scholarship as significant sources of career development and financial relief for first-generation students.

David Carnevale, Chapman’s director of undergraduate financial aid, told The Panther that Chapman is holding federal student loan consultations to explain the rights and responsibilities of students entering and leaving Chapman. The Financial Aid Office also works with professors to host student loan repayment strategies workshops that welcome students struggling to navigate student loans to meet with a counselor in person.

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Azucena Rodriguez-Baltazar, a first-generation Chapman graduate in the Class of 2020, told The Panther that she spent every semester of college working full-time — first starting at the McDonald’s on West Chapman Avenue in Orange her freshman year. . She and Ramirez both told The Panther that tuition is a high price to pay on their own without any financial support. Chapman currently pegs its full-time undergraduate tuition at approximately $56,830 for the 2020-2021 academic school year. This does not include additional fees such as room and board, student health insurance, and other related student costs.

“Honestly, if it wasn’t for … the amount of financial aid I received, I probably wouldn’t have gone (to Chapman),” Rodriguez-Baltazar said. “I probably would have gone to another school.”

Previous Previous Judge confirms Orange City Council member impeached, possible recall looms Next Next Former White House press secretary Dee Dee Myers talks female empowerment Last year, we estimated that eliminating student debt entirely would generate 8 to 23 cents of economic activity for every dollar of cost, and speculated that partial cancellation of student debt could have a higher multiplier.

In light of the current economic recovery and the use of new techniques made available in the Congressional Budget Office (CBO) working papers, we find that partial cancellation of federal student loans would also be an extremely weak stimulus, producing only 2 to 27 cents of economic activity for every dollar of spending.

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Partial cancellation of student debt would increase economic output in the coming years, but only at a small fraction of the total cost.

Student debt cancellation of $10,000 per borrower would completely eliminate student debt for 15 million borrowers and partially reduce debt for another 28 million at a cost of $210 billion to $280 billion. We estimate that this would reduce annual loan payments by about $18 billion a year (when the current automatic forbearance ends) or about $54 billion over three years. This means that even over three years, less than a fifth of the total amount forgiven would translate into cash savings.

Based on the existing literature, we estimate that these cash savings, plus the added wealth from student debt cancellation, would lead to $36 billion in increased consumption, leading to an increase in output of about $31 billion over three years. The net fiscal multiplier in this case would be roughly 0.13x. Using a wider range of assumptions, this multiplier could be as low as 0.03x to 0.27x.

A $50,000 repeal would erase all student debt for about 36 million borrowers and reduce debt for another 7 million at a cost of $950 billion, according to our estimates.

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This would reduce annual payments by $55 billion per year and $165 billion over three years. In our central estimate, we find that the resulting increased cash flow and wealth would increase consumption by about $104 billion, resulting in about $91 billion in added output over three years. The net fiscal multiplier would be 0.10x overall. Using a wider range of assumptions, this multiplier could be as little as 0.02x to 0.25x.

These multipliers are extremely low. Even during periods of extreme social distancing, CBO estimated that most COVID relief measures had a multiplier between 0.4x and 0.9x. Historically, the multipliers for most incentive policies ranged from 0.5x to 2.0x.

The multipliers for partial cancellation of student debt are low for three main reasons. First, partial repeal increases household cash flow very modestly relative to costs. Second, the benefits are poorly targeted at those who are less likely to spend any extra cash they receive. And third, the combination of a strong economic recovery, excess cash and supply constraints in the current economy suggests limited room for further growth in demand.

As we pointed out in last year’s analysis of eliminating student debt altogether, forgiving large amounts of this type of debt results in only modest reductions in annual repayment costs, freeing up only a small amount of additional funds to be used for consumption in the short term. . Student debt is generally paid off gradually over 10 to 30 years.

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In fact, most of the canceled debt would not result in any cash flow improvement this year. Roughly half of all dollar-denominated student loans are associated with borrower defaults

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