Canceling student-loan debt could have limited positive impact and introduce ‘moral hazard’ that would make the situation worse, Moody’s warns – Market Insider
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- Erasing student-loan debt could create a “moral hazard” that would weaken the effect of any economic stimulus, Moody’s Investors Service said in a recent report.
- Outstanding student-loan debt is $1.5 trillion, equal to 6.9% of US gross domestic product.
- Canceling student-loan debt could hurt the US government because it collects revenue on student loan payments, the report said.
- Still, Moody’s acknowledges the “significantly higher burden” of student loan debt in the US today.
- Read more on Business Insider.
Erasing outstanding student-loan debt could have a muted positive impact on the economy, and also create a “moral hazard,” according to a Friday analysis by Moody’s Investors Service.
In the last decade, outstanding student loan debt has more than doubled, and now stands at $1.5 trillion — equal to 6.9% of US gross domestic product, the broadest measure of the US economy, the report said. That’s made debt forgiveness a hot-button issue and led to proposals from Democratic presidential candidates Bernie Sanders and Elizabeth Warren to cancel some or all of Americans’ student loan debt.
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