What Would Forgiving Student Debt Mean for the Federal Budget?
In the intensifying debate over student debt forgiveness, we have noticed some confusion about how cancellation would affect the federal budget. Understanding how the government treats loans in its budget is helpful for understanding potential trade-offs between student loan cancellation and other policies to support the struggling economy, increase economic opportunity, and promote racial equity. Here we answer some basic questions about how student loans affect the federal debt and deficit.
From a budget perspective, what happens when the federal government makes student loans?
The federal debt increases when the federal government makes student loans. The federal deficit, however, typically ount. This can be confusing because the debt and deficit usually move together. (more…)