Over the years, there have been some discussions of a massive student loan bailout that would wipe out most or all of the student debt burdening millions of borrowers dealing with student loans. Indeed, I wrote an article on this topic a few years ago for another website, and I predicted that a student loan bailout would be fairly unlikely. I also wrote a similar article on this website a few years ago. Now that a new political landscape is on the horizon, people have been discussing a student loan bailout once again. However, for a variety of reasons, a student loan bailout is unlikely if it involves most or all outstanding student debt, and borrowers should not count on a bailout to take care of their student loans.
One reason why a student loan bailout is unlikely is due to the massive amount of money that would be needed to fund a bailout. The total amount of outstanding student loans in the United States is in the trillions of dollars. It would be extraordinary for the government to authorize the massive expenditure needed for a bailout. The federal government is borrowing substantial sums of money presently to provide relief because of COVID-19. It seems like an additional COVID-19 relief package is forthcoming. It would be unprecedented for the federal government to take on even more debt to provide some kind of wholesale student loan bailout anytime soon.
Another reason why a student loan bailout is unlikely is because such an initiative is regressive in nature. Many people with student loans also have higher salaries than people who did not take on student debt. This is because college and graduate degrees can have a large impact on the types of jobs individuals can pursue and the amount of money they are paid at those jobs. If a student loan bailout was passed, individuals with higher incomes may receive a benefit and individuals with lower incomes may not be as benefited from such an initiative. Since progressive political actors are typically the ones who discuss a student loan bailout, but a bailout may be regressive in nature, a student loan bailout is unlikely to occur.
In addition, there may be political realities why a student loan bailout is unlikely. A student loan bailout is a radical step that would upend how Americans view educational costs and student loans. However, most Americans are politically moderate, and would likely not support any type of wholesale student loan bailout.
I also appears as if we may be headed for divided government for the foreseeable future. Although the fate of the Senate is right now undecided, it looks like Republicans may control the Senate while the presidency and the House of Representatives are controlled by Democrats. It would be extremely difficult to get Republican leadership on board with any type of massive student loan bailout, since such an initiative runs counter to many GOP principles. Of course, the political landscape could change, but right now it does not appear as if widespread student loan forgiveness is currently in the cards.
Moreover, a student loan bailout is unlikely because it would provide an incentive for irresponsible behavior. Many people made responsible choices when considering educational costs and borrowing student loans. Some students attended lower-ranked schools in exchange for scholarships and grants so that their educational costs were reduced. Other students also worked part-time jobs in school or made other sacrifices to minimize their student debt burden.
However, some students were not that responsible when it came to fund their educational expenses. For instance, some students took the full amount of debt allowed for living expenses and then spent money that was supposed to be devoted to food, housing, and other costs frivolously. In addition, some students pursued expensive study abroad programs, took longer than normal to graduate, and otherwise took other steps to rack up more debt than necessary to earn their degrees. A wholesale student loan bailout is not fair to people who acted responsibly, since it eliminates the consequences of people who were irresponsible with their educational expenses. Policymakers understand this dynamic, and many may have a hard time incentivizing irresponsible conduct by providing a total student loan bailout.
Although a student loan bailout is unlikely if it completely wipes out student debt, it is more than possible that student loan relief, including partial forgiveness, could occur sometime soon. For instance, there are some plans to forgive a set amount of student debt for all student loan borrowers. Many discussions indicate that the amount of debt to be forgiven would be around $10,000 to $50,000, which would have a huge impact on many student loan borrowers. There have also been discussions about making the terms of income-driven repayment plans, and public service loan forgiveness, more generous so that borrowers can get more relief from these pre-existing programs. These initiatives have a far better chance of being instituted, since they involve less money, and it seems more fair to only forgive some debt and to work within the confines of pre-existing student debt programs.
However, a student loan bailout is unlikely if it involves the government forgiving all outstanding student debt for all borrowers, or even close to this sum. A massive student loan bailout would be extremely costly, involve a political landscape that is likely not present in the current environment, and may not be fair to people who made sacrifices and acted responsibly to pay off their student loans.