Student Debt Cancellation IS Progressive: Correcting Empirical and Conceptual Errors

Abstract

We examine the argument that student loan cancellation would be a regressive policy and show how it arises from several empirical and conceptual errors. The authors conclude that student cancellation can, in fact, be progressive and that more substantial cancellation policies would be more progressive. The reason for this progressivity is simple: people from wealthy backgrounds (and their parents) rarely use student loans to pay for college.

Through examination of five common mistakes that have led some to conclude that student debt cancellation is regressive, the authors show that student debt cancellation would provide more benefits to those with fewer economic resources and could play a critical role in addressing the racial wealth gap and building the Black middle class.

Keywords: student debt, wealth, inequality, race

JEL Classification: I24