The Pragmatic Case Against Taxpayer-Funded Student Loan Forgiveness

When the Biden administration announced its $4.28 billion student loan forgiveness initiative for public service workers, the debate ignited around fairness, equity, and economic impact. On the surface, helping public servants like teachers, nurses, and law enforcement officers sounds noble. After all, they’re essential to our communities. But when you dig into the numbers, the case for using taxpayer dollars to forgive this debt unravels quickly.

The Numbers Don’t Lie

Let’s start with the premise that forgiving $4.28 billion of debt is a way to stimulate the economy. Advocates argue that freed-up income will flow back into consumer spending, creating a ripple effect. However, this theory assumes a higher economic return than is realistic.

• Fiscal Multiplier: Research shows that the fiscal multiplier for student debt cancellation is 0.08 to 0.23—for every $1 spent, the economy gains only 8 to 23 cents in activity. Compare that to infrastructure spending, which yields $1.60 to $2.00 for every dollar spent.
• Economic Contribution Without Forgiveness: The 54,900 public service workers receiving forgiveness are already employed and contributing to the economy. Forgiving their debt doesn’t fundamentally change their output—it simply reallocates their disposable income. Instead of paying student loans, they might save, pay down other debts, or spend cautiously. Their overall contribution remains largely the same.
• Taxpayer Equity: Why should families who made sacrifices to avoid student debt, or those who never attended college, bear the burden of paying off loans for others? The policy disproportionately benefits individuals with higher education levels and incomes, leaving those without degrees—often lower-income workers—shouldering the tax burden.

The Pragmatic Approach: Objectives and Perspective Matter

When evaluating policies like student loan forgiveness, it’s critical to clarify the objectives:

• Economic Stimulation? If the goal is to boost the economy, investing in areas with higher ROI—like infrastructure, universal broadband, or workforce training—would yield far greater benefits.
• Helping Public Servants? If the goal is to support public service workers, raising wages, offering better benefits, or providing tax credits would be more equitable solutions that don’t rely on forgiveness programs.
• Reducing Debt Overall? If the aim is to address systemic student debt issues, the solution lies in reforming education funding and loan programs—not retroactively canceling debt.

Two Perspectives on the Debate

This debate offers a great case study in how perspective shapes conclusions.

1. Pragmatic, By-the-Numbers Approach

This is the approach I take. Numbers don’t lie. When we analyze student loan forgiveness, it fails to deliver sufficient ROI for taxpayers, doesn’t significantly alter the economic contributions of recipients, and creates equity issues. Helping a subset of borrowers at the expense of the majority isn’t fair or efficient.

2. Emotional, Holistic Approach

This perspective (championed by my friend Eric) argues that helping public service workers helps society as a whole. Public servants play a vital role in our communities, and reducing their financial burdens could indirectly benefit everyone. However, this approach often relies on anecdotal evidence and overly optimistic assumptions about economic multipliers.

Why This Policy Misses the Mark

Forgiving student loans through taxpayer dollars fails because it:

• Doesn’t significantly stimulate the economy.
• Benefits a select few at the expense of the majority.
• Avoids addressing the root causes of student debt.

Public servants are valuable, but this policy focuses on the wrong solution. Instead of forgiving debt, we should consider higher-impact investments that benefit all Americans—improving infrastructure, expanding access to broadband, or supporting universal childcare. These investments create widespread benefits and ensure a fairer distribution of taxpayer dollars.

Conclusion: Let’s Focus on What Works

Taxpayer dollars are finite. When we spend them, we should demand the highest possible return—economically, socially, and equitably. While the intention behind student loan forgiveness is admirable, the execution misses the mark. To truly make a difference, we must focus on policies that deliver the greatest benefit to the greatest number of people.

It’s time to rethink this approach and prioritize investments that work for everyone.