Cancel All Student Debt: Economic Liberation or Theft from the Working Class?

A 2020 study by the Roosevelt Institute and the Groundwork Collaborative found that canceling all student debt would reduce the racial wealth gap for Black households by up to 25 percentage points, and for Latino households by up to 24 percentage points. The analysis used data from the ederal Reserve's Survey of Consumer inances and modeled the effects of full forgiveness, showing that Black and Latino borrowers—who hold a disproportionate share of debt relative to their incomes—would see the greatest proportional wealth gains. The authors argue that the policy acts as a targeted stimulus, freeing up cash for homeownership, retirement savings, and small business investment in communities historically denied wealth accumulation.

Using Census Bureau's 2021 American Community Survey and Consumer inance data, researchers at the Levy Economics Institute of Bard College estimated that canceling all $1.7 trillion in student debt would increase U.S. GDP by an average of $108 billion per year over a decade, create 1.2 million new jobs, and raise homeownership rates by 2.5 percentage points among borrowers under 40. The study emphasizes that lower-income borrowers—including many in trades and service jobs without degrees—benefit indirectly through increased consumer spending and local economic activity, as freed-up loan payments are redirected to goods and services. The authors argue that the multiplier effect of debt cancellation exceeds that of most tax cuts, making it a progressive economic stimulus that helps the broader working class.

A 2022 working paper from the National Bureau of Economic Research (NBER) analyzed the distributional impact of student debt cancellation. The authors found that over 50% of the outstanding debt is held by households in the top 40% of the income distribution, and that full forgiveness would provide an average wealth gain of $29,000 to the top quintile, compared to just $1,300 for the bottom quintile. The paper also notes that the policy is financed by general taxation, meaning that working-class taxpayers without degrees—such as truck drivers, factory workers, and retail employees—effectively subsidize a transfer to higher-income professionals. The authors conclude that broad cancellation is regressive, widening the gap between those who borrowed for advanced degrees and those who never attended college or attended community college without taking on debt.

In September 2022, the Congressional Budget Office (CBO) estimated that the Biden administration's plan to cancel up to $20,000 in student debt per borrower would cost approximately $400 billion over the next decade. The CBO analysis highlighted that the financing would come from general federal revenues, which are disproportionately funded by payroll and income taxes paid by workers across all education levels. A separate analysis by the Tax oundation found that the bottom 60% of income earners—many of whom never attended college or did not complete a degree—would bear roughly 35% of the tax burden for forgiveness, while receiving only 20% of the benefits. The report argues that this creates a direct transfer from those who avoided debt through work or vocational training to those who borrowed for higher education, undermining the claim that the policy aids the working class.