Education is probably one of the most expensive things in life you spend your hard earned money on. Most college students even need a loan to pay for their classes. That’s the reason why approximately 45 million Americans have a student loan debt.
Together they owe the US Government close to $1.5 trillion dollars. This is such a high amount, that even some politicians now are convinced that obtaining a college degree should be free so that students can focus on what’s important: their education.
This all led the Levy Economics Institute of Bard College to study what it would mean for the real GDP if current student loans would be canceled. The results of the studies were that it would boost the GDP by more than $108 billion per year.
The reason for this would be that millions of families across the country would have $393 more to spend on other things than paying off their student loan.
Canceling student loans would also be very cost effective for the US because it is the largest holder of the student loan debt (it owns more than 70% of outstanding obligations).
So by eliminating future loans and canceling the already existing ones, the government would save more than $145 billion a year on forgone interest payments and on compensating private lenders.