Economists: Ohio student loan forgiveness might raise tuition, but not inflation

Conditions for forgiveness could help keep graduates in Ohio, economists say

By: - November 25, 2022 9:22 am

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President Joe Biden continues to defer student loan payments as the legality of his plan to forgive $10,000 to $20,000 in student loans is hashed out in court.

But if Ohio were to implement its own blanket student loan forgiveness, it might have the ironic effect of incentivizing institutions to raise tuition costs, but would be unlikely to affect inflation as a whole, a panel of economists said in a survey this week. The panel, convened by the Columbus firm Scioto Analysis, also said that state-level loan forgiveness would allow Ohio to retain educated workers. Ten agreed with the latter proposition, while four disagreed and nine were either uncertain or had no opinion.

Many of the economists who agreed that forgiveness would help retain workers did so conditionally, raising questions that were similar to those of their colleagues who were uncertain.

“If the program was structured such that the forgiveness was conditional in staying in Ohio for a certain period of time,” Bob Gitter of Ohio Wesleyan University wrote in the comment section of the survey to support his position that state loan forgiveness would retain educated workers. 

But a colleague said such a strategy shouldn’t be employed at the state level.

“Student debt cancellation should be a national policy, rather than state-by-state,” wrote Fadhel Kaboub of Denison University, who was uncertain. “There is no guarantee that beneficiaries of student debt cancellation will stay in Ohio unless it is tied to minimum years of public service or employment requirement in Ohio. Say after five years of working in Ohio the full balance of your student debt is canceled.”

One economist who disagreed that state-level forgiveness would help retain educated workers said we should wait to see what happens on the federal level first.

“All but one state has a student loan forgiveness program that offers relief for students struggling to pay student loan debt,” wrote Diane Monaco of Heidelberg University. “However, the Biden student debt forgiveness program at the national level should be unblocked first (illegally blocked by the courts) before analyzing any changes to the existing state level loan forgiveness programs.”

Ohio currently has various loan forgiveness programs for certain professions and service programs.

In terms of loan forgiveness increasing tuition costs, Paul Holmes of Ashland University said some schools might raise tuition and try to blame it on that, but the claim would be misleading.

“It might be used as an excuse to raise tuition at state schools, but that’s a political decision, not an automatic result of a loan forgiveness policy,” he said. “I doubt this would have any significant effect on private schools.”

And in answer to whether state-level loan forgiveness would increase inflation in the larger economy, Jonathan Andreas of Bluffton University said such a program would be too small to have such a big effect.

“No measurable effect because inflation is everywhere and always a nationwide phenomenon, and this Ohio program is simply far too small to have any discernible effect,” Andreas wrote. “The state routinely makes much bigger fiscal changes that have had no effect. Plus the state has a constitutional balanced-budget requirement, so the state would have to make a contractionary adjustment elsewhere in the budget. Even if it could have a measurable effect on inflation, the Fed would adjust monetary policy to keep inflation on target, so there is simply no way it could cause inflation.”

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Marty Schladen
Marty Schladen

Marty Schladen has been a reporter for decades, working in Indiana, Texas and other places before returning to his native Ohio to work at The Columbus Dispatch in 2017. He's won state and national journalism awards for investigations into utility regulation, public corruption, the environment, prescription drug spending and other matters.