Just to put that in some context – $74 billion would very likely cover Sanders’ plan for tuition free public universities; a plan called impossible and unaffordable by many during his campaign.
In terms of tuition free public university – this change will likely save direct spending money both in the short and long term:
Eliminating tuition at all public colleges and universities would cost at least $79 billion a year, according to the most recent Department of Education data, and taxpayers would need to foot the bill.
Consider, though, that in 2016 (the most recent year for which detailed expenditures are available), the federal government spent $91 billion on policies that subsidized college attendance. That is more than the $79 billion in total tuition and fee revenue for public institutions. At least some of the $91 billion could be shifted into making public institutions tuition-free.
First, about $37 billion of the federal money went toward tuition tax credits and other tax benefits, which disproportionately helped wealthier families, who were likely to send their children to college without government help. I’m not proposing that these benefits be cut — but in a financial pinch, some of this aid could be repurposed to allow for tuition-free public institutions, which would help poorer people more.
Second, $41 billion in federal spending went toward aid for low-income students and military veterans, while $13 billion subsidized interest payments on student loans while students were enrolled in college.
If tuition payments were eliminated, students at public colleges would have less need for these programs. (College costs also include room and board, books and supplies, and other living expenses, so tuition-free college would not eliminate the need for financial aid, even at public schools.)
In short, at least some — and perhaps all — of the cost of universal tuition-free public higher education could be defrayed by redeploying money that the government is already spending.
Then extending this to student debt forgiveness. Highly recommend checking out this study from the Levy Institute:
Estimates for new GDP range from $861 billion to $1,083 billion over the entire period, or on average between $86 billion and $108 billion per year. This increase is accompanied by new job creation that peaks at 1.18 to 1.55 million additional new jobs per year, or 50 to 70 percent of the entire job creation for a typical year in the 2010–15 eco- nomic expansion. Average unemployment rates over the period are reduced by between 0.22 and 0.36 percentage points
Our analysis suggests that debt cancellation is a feasible program that would increase economic activity in the short run with moderate consequences on the federal deficit. These consequences should be balanced against the important social gains available from greater investment in higher education and the relief of debt as educators, advocates, borrowers, and policymakers continue to debate the path forward for US higher education.
The absolution of student debt could have profound impacts on small business and entrepreneurship, as laid out in this Harvard Business Review article. This freeing of capital to spend increasing consumer demand throughout the economy. At the same time more difficult to measure metrics would be altered: for instance, the physical health benefits that come from debt relief, which would occur considering debt/money is a leading cause of stress in the US. Some estimate stress costs the US $300 billion a year, though this estimation is difficult to get completely accurate.
For those that might counter with, “ah, but see, the deficit might increase”, remind them that the deficit has currently shot up under Trump to the point of almost 1 trillion dollars (before COVID), meanwhile we have seen nothing as beneficial to working people as student loan cancellation. In addition, plans that would go into effect along with debt cancellation (such as tax increases) would work to reduce the deficit simultaneously.
Carrying this further, it is important to remember that measured deficit spending for long term growth is good. Of course, Trumpian style deficit spending has major issues. But, a broad deficit hawk/austerity mentality is incredibly harmful, with Republicans parroting it whenever a Democrat is in office, and Democrats parroting it whenever they want to appear “fiscally responsible”. This not even getting into some of the larger issues with austerity.
According to research from the Boston Fed and University of Maine, the government actually receives a return of at least $7.46 per dollar invested in higher education. Whether this exact figure would be maintained with full scale free public college tuition is unclear, however, evidence of the long term benefits to higher education investment remains strong. The above return on investment number is taken from direct financial return, so does not include more difficult to measurement returns, such as connections between education and crime reduction.
Here are some articles on good deficit spending:
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