Cancel student loans or $ 1,000 a month for life?
Which do you prefer: cancel student loans or $ 1,000 a month for life?
Here’s what you need to know:and how it might affect you.
If you had a choice between student loan cancellation and Universal Basic Income, which would you choose? Before Joe Biden became president or the next term of Congress began, these two proposals made a resurgence. In a corner, the defenders want at least $ 10,000 student loan forgiveness for each student borrower. In another corner, advocates want to give every American adult $ 1,000 a month for life. There are variations on these proposals: some have offered to cancel student loans up to $ 50,000 while others have offered $ 2,000 per month until the end of the Covid-19 pandemic. Here are the pros and cons of each proposition and what each proposition could mean for your portfolio.
Cancel student loans
Senator Bernie Sanders (I-VT), Senator Elizabeth Warren (D-MA) and other members of Congress have proposed to cancel student loans. These proposals have ranged from the cancellation of all $ 1.6 trillion in student loans to $ 10,000 in student loans.
Supporters argue that the cancellation of student loans:
- Stimulate the economy
- Help young people get married, start a family, buy a house and save for their retirement sooner.
- Free a generation of Americans from the shackles of crush student loan debt
- Reduce social and racial disparities
- Provide economic assistance to parents and seniors who have Parent PLUS loans
Opponents argue that the cancellation of student loans:
- disproportionately benefit the richest Americans
- disproportionate benefit student loan borrowers with a graduate degree who can earn higher income
- exclude the tens of millions of people without a college degree or who have never borrowed student loans, many of whom have lower incomes or who have lost their jobs due to the Covid-19 pandemic
- be subsidized by federal taxpayers and represent an unfair transfer of wealth
- be unfair to former student borrowers who have already paid off their student loans (and in many cases struggled to do so)
- encourage future student loan borrowers to forgo their student loan repayments as they might expect their student loan forgiveness in the future.
- be an unproductive use of taxpayer funds when there are more pressing economic problems that can be addressed through second stimulus checks, better unemployment benefits and small business support.
Universal Basic Income: $ 1,000 per month for life
Andrew Yang, a former 2020 presidential candidate, is one of many advocates who have proposed Universal Basic Income (UBI) – a form of social security that guarantees money to beneficiaries. Under his plan, which he calls a “freedom dividend,” every US citizen over the age of 18 would receive $ 1,000 per month, or $ 12,000 per year. There is no requirement to receive the money, and the funds are guaranteed, monthly payments that would continue in perpetuity. Yang’s UBI proposal came before Coronavirus and was not directly linked to an economic crisis or a health pandemic.
Proponents argue that the Universal Basic Income:
- provide a stable and recurring source of income
- stimulate economic growth as more people spend money in their local economy
- support workers left unemployed by technological disruption
- expand the middle class and reduce poverty
- discourage employers from paying low wages
- reduce the stigma attached to government benefits
Opponents argue that the universal basic income:
- dissuade from working
- cost trillions of dollars per year and are therefore prohibitive to implement
- be unfair if millionaires and billionaires receive the same amount of money as someone who has a job or low income
- result in lower wages because employers will simply reduce wages by the annual amount of the Universal Basic Income.
There are many other arguments and counter-arguments in favor of both canceling student loans and the Universal Basic Income. While student loan forgiveness and Universal Basic Income have support in Congress, that support is largely on the Democratic side of the aisle in both the House and Senate. Congress could pass legislation on student loan forgiveness, universal basic income, both, or neither. As such, the makeup of Congress could have a major impact on whether either of these proposals becomes law. While some argue the president can unilaterally cancel student loans, Congress should approve the Universal Basic Income for all adult Americans. Without bipartisan support, it can be difficult for either to become law in the short term.
Pay off student loans
As Congress and policymakers debate the future of student loan forgiveness and the Universal Basic Income, now is the time to focus on student loan repayment. Here are 3 smart starting points, all free: