How much will student loan forgiveness cost taxpayers?

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Student loan forgiveness has been a widely debated topic in recent years, with proponents arguing that it can alleviate the burden of student debt and stimulate economic growth. However, one crucial aspect that needs to be considered is the cost to taxpayers. This article will delve into the potential financial implications of student loan forgiveness and explore how it may impact taxpayers.

The Scope of Student Loan Forgiveness

Before discussing the cost to taxpayers, it is important to understand the scope of student loan forgiveness. Various proposals have been put forward, ranging from complete forgiveness of all outstanding student loans to targeted relief for specific groups, such as low-income borrowers or those working in public service.

Estimating the Cost

Methodology: Estimating the cost of student loan forgiveness is a complex task that involves numerous variables. Several factors need to be considered, including the number of borrowers eligible for forgiveness, the amount of debt forgiven per borrower, and the repayment plans involved.

Number of Borrowers: To determine the cost, we need to establish the number of borrowers who would be eligible for loan forgiveness. According to the Federal Reserve, there are approximately 45 million student loan borrowers in the United States. However, not all of them would qualify for forgiveness under proposed plans.

Amount of Debt Forgiven: The amount of debt forgiven per borrower is another crucial factor. Different proposals suggest different levels of forgiveness, ranging from a partial reduction to complete elimination of the outstanding balance. The average student loan debt per borrower is around $30,000, but this figure can vary significantly depending on the individual’s education level and the type of loans they hold.

Repayment Plans: The repayment plans associated with student loan forgiveness also impact the cost to taxpayers. Some proposals require borrowers to make a certain number of payments before becoming eligible for forgiveness, while others offer immediate relief. The repayment period and interest rates also play a role in determining the cost.

Cost to Taxpayers

Scenario 1: Complete Loan Forgiveness: Let’s consider a hypothetical scenario where all outstanding student loans are completely forgiven. If we assume an average debt of $30,000 per borrower and consider all 45 million borrowers eligible, the cost would amount to approximately $1.35 trillion.

Scenario 2: Targeted Loan Forgiveness: Alternatively, if loan forgiveness is targeted towards specific groups, such as low-income borrowers or those working in public service, the cost would be significantly lower. For example, if we assume that only 10 million borrowers are eligible for forgiveness and the average debt forgiven is $20,000, the cost would be $200 billion.

Benefits and Drawbacks

While the cost of student loan forgiveness is a significant concern, it is crucial to consider the potential benefits and drawbacks. Proponents argue that forgiving student loans can stimulate the economy by allowing borrowers to invest in other areas, such as housing or starting businesses. It may also improve the overall financial well-being of individuals, reducing defaults and delinquencies.

However, critics argue that the cost to taxpayers is unjustifiable and that it may create moral hazard by encouraging irresponsible borrowing in the future. They also point out that loan forgiveness primarily benefits higher-income individuals who hold larger loan balances, rather than those who are most in need.


The cost of student loan forgiveness to taxpayers is a complex issue that depends on various factors, including the number of borrowers eligible, the amount of debt forgiven, and the repayment plans involved. While complete loan forgiveness may have a substantial cost, targeted relief for specific groups can significantly reduce the financial burden. It is essential to carefully consider the benefits and drawbacks of such policies before making any decisions.


– Federal Reserve:
– U.S. Department of Education:
– Congressional Budget Office: