Why Canceling Student Debt Is a Bad Idea

Why Canceling Student Debt Is a Bad Idea


In recent years, the idea of canceling student debt has gained significant traction among politicians and the public. Proponents argue that it would address the growing student loan crisis and provide relief to millions of individuals burdened with massive debts. However, canceling student debt is a flawed solution that would have far-reaching negative consequences. This article will explore the reasons why canceling student debt is a bad idea, focusing on the economic impact, moral hazard, and fairness concerns associated with such a policy.

Economic Impact

1. Cost to taxpayers: Canceling student debt would come with an enormous price tag that would ultimately be borne by taxpayers. The Federal Reserve estimates that student loan debt in the United States exceeds $1.7 trillion. Writing off this debt would result in a significant increase in public debt, leading to higher taxes or reduced government spending in other essential areas.

2. Distorted incentives: Canceling student debt would create a moral hazard by sending the message that individuals can borrow freely without consequences. This could lead to a surge in demand for higher education and an increase in tuition fees, as colleges and universities would have little incentive to control costs. Ultimately, this would exacerbate the student debt crisis in the long run.

Moral Hazard

1. Personal responsibility: Canceling student debt undermines the principle of personal responsibility. It sends a message that individuals are not accountable for their financial decisions and encourages a culture of entitlement. It is unfair to the majority of students who diligently worked to pay off their loans or made financial sacrifices to avoid excessive debt.

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2. Impact on future borrowers: If student debt is canceled, future borrowers may be less cautious about their loan decisions, assuming that their debts will be forgiven eventually. This distorted perception of risk could lead to even higher levels of borrowing and further burden the economy in the future.

Fairness Concerns

1. Unfair to non-borrowers: Canceling student debt would be unfair to individuals who did not pursue higher education or took alternative paths to avoid debt. They would effectively be forced to pay for the educational choices of others, creating an inequitable burden on those who made different life decisions.

2. Wealth distribution: A significant portion of student loan debt is held by higher-income individuals who attended prestigious institutions. Canceling their debt would effectively redistribute wealth from taxpayers, many of whom are struggling to make ends meet, to the relatively well-off. This raises questions about fairness and equity in society.


Q: Won’t canceling student debt stimulate the economy?
A: While canceling student debt may provide short-term relief to individuals, the long-term economic consequences outweigh the short-term benefits. The cost to taxpayers and the potential for increased moral hazard far outweigh any potential economic stimulus.

Q: What about the argument that canceling student debt would increase college enrollment rates?
A: While it is true that canceling student debt could increase college enrollment rates in the short term, it would also lead to increased tuition fees and further exacerbate the student debt crisis. Additionally, it fails to address the root causes of rising tuition fees and the need for education reform.

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Q: What alternatives exist to address the student debt crisis?
A: Instead of canceling student debt, policymakers should focus on implementing measures to control rising tuition fees, promote financial literacy, and provide targeted relief to those in genuine financial hardship. This approach would be fairer, more sustainable, and avoid the negative consequences associated with canceling student debt.


While canceling student debt may seem like an appealing solution to the growing student loan crisis, it is ultimately a bad idea. The economic impact, moral hazard, and fairness concerns associated with this policy outweigh the potential benefits. Instead, policymakers should focus on implementing long-term solutions that address the root causes of the student debt crisis and promote responsible borrowing.