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... However, some authors highlight potential drawbacks in policies aiming to reduce the BRAZILIAN KEYNESIAN REVIEW, 9(1), p.53-76, 1 st Semester/2023 current outstanding student debt balance. One argument against those policies is their moral hazard: canceling the outstanding balances would favor those who miscalculated the costs and benefits of the investment at the expense of those who managed to make the repayments properly (Fullwiler et al., 2018). Ultimately, this could increase the number of new borrowings because people would expect the government to cancel their debt balances again in the future. ...
... household consumption. This policy could benefit the recovery pace of the US economy, especially in the aftermath of the current economic-health crisis.Fullwiler et al. (2018), for example, estimate a positive impact of universal student debt forgiveness in the US to aggregate demand through consumption and investment, with a cumulative effect in ten years on GDP ranging from $861 billion to $1,083 billion (in 2016 dollars). This policy would result in an average job creation per year of 1.2 million to 1.5 mi ...
This paper aims to contribute to the debate on the US student debt situation. First, it highlights the determination of labor earnings and economic activity as a function of macroeconomic conditions and the relevance of considering this endogeneity to analyzing student debt sustainability. Next, I present a background on student loans and the labor market in the US. Moreover, using a Minskyian framework, I argue that the current student debt situation can have adverse results on economic activity, although not leading to financial instability. Last, I comment on the student debt cancellation debate, proposing alternative policies with more progressive and lasting effects.
... The result is the existence of thousands of young adults who begin their working lives heavily indebted. In the United States, this has significantly influenced the economic dynamic itself by reducing households' consumption capacity (Fullwiler et al., 2018). According to data from late 2020, 42.9 million Americans owe a total student debt of US$1.57 ...
In this chapter, we examine how financialization is reshaping the purpose, design, and delivery of social policy under contemporary capitalism. We argue that social policy is increasingly organized around financial logics, institutions, and instruments, shifting its role from promoting socioeconomic security and collective welfare to facilitating financial accumulation. One of our central contributions is to show how this transformation reconfigures the relationship between the state, households, and markets, particularly through mechanisms like debt, microcredit, and the use of cash transfers as financial collateral. We clarify how financialization affects both the supply and demand sides of social provision across pensions, education, and health by subordinating them to investor interests and market imperatives. We highlight how social policy now acts as a platform for financial expansion, creating new sites of extraction in areas traditionally governed by public provision. This shift, we argue, deepens social inequalities and increases household vulnerability, especially in the Global South. Our analysis brings attention to the state's active role in enabling these processes through regulatory change, credit programs, and infrastructure financing. In doing so, we offer a framework for understanding financialization as more than an economic trend: it is a political restructuring of welfare and social reproduction. We call for renewed scrutiny of how financialized regimes reshape social rights and the future of public policy.
... Considering the current concern about the US student debt sustainability, as discussed in the Introduction, one public policy that has been extensively debated relates to the cancelation of a fraction of the student debt balance held by the US government (Fullwiler et al. 2018;Catherine and Yannelis 2020). Similarly to Fullwiler et al. (2018), I verify a positive impact of student debt cancelation on economic activity. ...
... Considering the current concern about the US student debt sustainability, as discussed in the Introduction, one public policy that has been extensively debated relates to the cancelation of a fraction of the student debt balance held by the US government (Fullwiler et al. 2018;Catherine and Yannelis 2020). Similarly to Fullwiler et al. (2018), I verify a positive impact of student debt cancelation on economic activity. However, I highlight that they are short-term effects only. ...
... For this reason, the extent of the policy implications depends on their inflationary effects. A study that supports the plausibility of this assumption is Fullwiler et al. (2018), which verifies negligible inflationary effects and modest increases in the public deficit-to-GDP in the scenario of canceling the total outstanding balance of student loans. 18 Nonetheless, they also verify a significant short-term effect on economic activity and its attenuation in the medium run. ...
This paper aims to analyze the sustainability of student debt in the US. For this purpose, I build a neo-Kaleckian model in which households can borrow to either consume or invest in human capital. Next, I calibrate the model using US data to simulate the economic effects of specific policies such as student loan forgiveness. To my knowledge, this is the first study that considers household borrowing for two different purposes, consumption and human capital accumulation, in a demand-led macro-modeling framework. The main findings are that (i) household debt is sustainable in the long run (i.e., the debt servicing is compatible with the long-term economic growth) for a consumption level greater than 90% of household income; (ii) new borrowing boosts short-term economic activity while having ambiguous long-term effects because of its outcomes to household indebtedness and debt servicing; and (iii) student loan cancelation has only short-run economic effects, whereas reducing loan interest rates and changing the eligibility criterion for student loan forgiveness result in long-term effects.
... The federal government in 2021 eliminated US $11.5 billion of student loan debt for 600,000 borrowers who either suffer from a permanent disability or who were defrauded by for-profit colleges (Minsky 2019). Some officials recommend discharging much more student loan debt (Fullwiler et al. 2018;Warren and Schumer 2020). If debt forgiveness is not an option, Congress at minimum could pass laws that offer interest free loans to student borrowers and eliminate excessive default penalties that can equal up to 25% of the outstanding student loan balance (Minsky 2019). ...
This paper uses stratification economics to study intergroup disparities among student loan borrowers. Today, approximately 44 million Americans hold around US $1.7 trillion in student loan debt, with over 20% of borrowers in default. Over one million borrowers fall into default annually. We find that Black and first-generation students have lower college completion rates, default more often on student loan debts, and gain less of a wage premium from their college degrees and graduate degrees compared to white graduates. We also find significant racial and class differences in household wealth generation among college graduates. We use the most recent data from the Federal Reserve Bank of New York’s Consumer Credit Panel and the Survey of Consumer Finances to study the changing size and distribution of student loan debt and default rates based on race and class. What we find is that the student loan debt system creates significant debt traps for many Black and first-generation students.
... Additionally, while our model was not constructed to examine the impact student debt cancellation would have on other important social measures like crime rates, educational attainment, household formation, small business startups, or public health outcomes, there are large bodies of research (some of which you can find in this volume) that support claims that these indirect benefits or spillover effects are likely outcomes from this macroeconomic stimulus (Fulwiler et al. 2018). There is significant evidence that student debt cancellation is an economic policy that improves the balance sheets of individuals directly, but is also able to generate positive spillover effects in neighborhoods, communities, and even at the level of state budgets. ...
Although academic departments often prepare students through education on the scientific foundations of climate change from the perspectives of such fields as conservation biology, environmental geoscience, or environmental geology, our college aims to provide a broader perspective on the climate change issue. To do so, we engage students in a more targeted manner, based on their disciplinary and program focus. For some students, this involves application of geotechnology and modeling applications so they are more informed on the technology necessary for monitoring greenhouse gases and their related impacts. For others, we focus more on promoting dialogue on the educational and societal implications of climate change by integrating perspectives from environmental economics, entrepreneurship, art, and social foundations of education through active learning activities. In this chapter, we present an interdisciplinary perspective on sustainability rooted in the concept of climate debt.
... A recent quasi-experiment in debt cancellation at a for-profit college has shown immediate personal benefits to borrowers ranging from increased income to geographic mobility (Di Maggio, Kalda, and Yao 2019). Scholars have also shown student debt forgiveness can have a net positive economic impact (Fullwiler et al. 2018), which means it can also serve as a stimulus to bolster economic recovery. Our analyses show that debt forgiveness can also serve racial justice goals. ...
Student debt in the United States has had a disproportionate negative impact on black and Latinx borrowers. We argue that analyses of plans proposing student debt cancellation should therefore foreground their potential impact on racial equity. To do so, we use data from the 2019 Survey of Consumer Finances and model the impact of debt cancellation on four key policy outcomes (reach, impact on the most vulnerable borrowers, borrower wealth gains, and impact on racial wealth gaps). We examine universal policy designs as well as designs that incorporate an income eligibility threshold as a means of targeting benefits toward less affluent borrowers. We find that cancellation amounts ranging from 75,000 yield the most desirable outcomes, especially when paired with a relatively low household income eligibility cutoff at between 150,000. Such policies would cancel roughly half of all outstanding student debt without substantially expanding the racial wealth gap, while still reaching a large majority of borrowers and leading to substantial wealth gains, especially for black households.
... The second issue concerns the inability of students to repay their loans. The simple presence of student debt reduces an individual's net worth and disposable income, driving down consumption and investment spending, and places downward pressure on the economy (Fullwiler et al. 2018). Meanwhile, if a sufficient number of people with student debt default, this could lead to a crisis in the educational financing system. ...
How the growth in student debt is impacting the well-being of the larger community is explored using U.S. county level data. Using tax return data from the Internal Revenue Service (IRS) we find that higher levels of student debt tends to be associated with lower levels of community well-being. Specifically, lower rates of home ownership, higher rental market stress, lower rates of entrepreneurship and poorer health behaviors. While the decision to take on student debt is an individual decision, local communities are uniquely positioned to help students make decisions around taking on debt and repayment options.
... • Cancel all federal student loan debt. 22 ...
For 22 years, we have sought to understand what children need to reach their fullest potential. This search has led us to embark on a bold thought experiment and ask: What if the structural inequities that drive racial/ethnic disparities in education attainment in the United States were eliminated?
We share our attempt to answer that question with a new What If system simulation policy brief – “Moving Toward a More Equitable and Just Society: What would racial/ethnic justice through equitable education attainment for all Black and Latinx Americans look like?”
The COVID-19 crisis has already increased food insecurity and exacerbated education disparities among children at alarming rates. In these uncertain times, we know too well how families across the United States are finding themselves navigating social safety net and education systems that marginalize Black and Latinx children. We hope this brief contributes to the hard work of moving our nation towards an education system that embraces big ideas, targets policies that reverse the overwhelming challenges our children face, and crystalizes a call to action for all those who believe that racism and discrimination have no place in schools–or anywhere else.
... Furthermore, for individuals and small businesses whose income is affected by rent and utilities forgiveness should be granted, so we do not observe an increase in indebtedness. Similarly, the six-month freeze on student loan payments in the CARES Act is a start, though outright student loan forgiveness would be even better (Fullwiler et al. 2018). ...
Original download link: http://www.levyinstitute.org/publications/pandemic-of-inequality
... This model assumes that there is an economic good from which students benefit, therefore, they should pay for their higher education. No account is taken of the social good that such an education might bring either directly or through the personal development of the student [28]. Nor is much notice taken of the fact that this good is increasingly less to those at the lower end of the income distribution without taking on significant debt or being able to obtain scholarships. ...
