Could Loan Forgiveness Create More New Car Sales?

A vast proportion of Americans are in debt, and wages are stagnant, so there’s no wonder that new vehicle sales are in decline –they’re down 2 percent from this time last year. Many people are struggling each month to cover the basics and cannot afford to purchase a new car.

Millennials struggling with debt

And student debt accounts for the most significant economic struggles for millennials and other generations. An estimated 44.7 million people in the US have student loan debt, that’s a staggering 1 in 4 Americans. The expected student debt is at a whopping $1.49 trillion, with the average monthly payment at around $400. Which is equivalent to a car payment! So the short answer is yes, it could create more car sales. So let’s take a closer look.

High costs prevent sales

Millennials are now the largest living adult generation. They are the key demographic in determining the success of the new and certified pre-owned market. But the high vehicle costs prevent them from purchasing a new car, coupled with being burdened by astronomically high student debts. Leaving the average adult with little to no disposable income for the purchase of new items, including vehicles.

Bernie Sanders loan forgiveness bill

Several Democratic presidential candidates have broached the issue of student loan forgiveness, and the most blatant has been Senator Bernie Sanders. Senator Sanders has introduced a bill that would cancel all of the estimated $1.5 trillion of student debt. According to the Senator, it would free up $3,000 a year for the average student loan borrower, which would provide an economic boost of almost $1 trillion over ten years.

Historic stimulus

This kind of incentive could have enormous impacts and could boost many sectors in the economy, such as housing and automotive. These days, young people can barely afford a place to live, and they certainly don’t have enough disposable income to buy a new car when burdened with the prospect of decades of crippling student loan debt.

Extra monthly income could buy a new car!

With almost $400 extra in their pockets, the majority of them being millennials could potentially be in the market for a new vehicle. This kind of stimulus program would be life-changing for many people. It would reduce not only financial burdens but also eliminate the associated stress and worry.
So it would be a win-win all around –benefitting the economy, the loan borrowers, and it would stimulate the automotive industry, potentially leading to more new car sales.

Buyer Beware

The next item you have to address is if this bill will go into place what will you need to do to get your loans forgiven? There are portions of the bill that have high barriers to entry. You first have to qualify for loan forgiveness and continue to follow up with your case. As it stands currently 99% of applicants have been denied for loan forgiveness.