YES: Student debt relief is good policy – and good policy
By Josh Hoxie
Ask any youngster, or anyone who knows young people, about student debt, and you will likely hear a combination of frustration, exasperation, and hopelessness. Every year, data shows that the problem is getting worse.
The hope for a solution seems fleeting. Or, at least, he did.
Senator Bernie Sanders came up with the idea of forgiving student debt and making college attendance free for the general public. A poll by The Hill newspaper shows that 58% of Americans now support free public colleges and student debt cancellation.
Young people are caught between the hope that their college education will give them the best chance for prosperity and the fact that their cost has been rising rapidly for years.
A 2017 study by the Economic Policy Institute found that the pay gap between college graduates and those just graduating from high school is at an all-time high. College graduates, on average, earned 56% more than high school graduates in any given year.
No, not everyone needs or wants a degree. There are still jobs that offer good pay and benefits and do not require them. However, with the decline of the labor movement, these jobs are not as plentiful as they used to be. For many, a university degree is increasingly necessary to move forward.
But this diploma comes at an increasing cost. And the salary you earn after college may not be enough to keep up.
Millennials are fast becoming the first generation in modern American history to earn less than their parents. Today’s rising generation earns 20% less than their parents at their age, despite being better educated and more productive. They buy homes later and at a lower rate, delaying family formation longer and saving less for retirement.
Meanwhile, college tuition fees have grown six times faster than inflation since 1970. Without a significant change to public policies creating that dynamic, young people – along with the rest of us – are screwed.
Student debt now exceeds $ 1.6 trillion nationally, with the average school leaving graduate carrying nearly $ 30,000 in debt. Many leave school with two, three or four times that amount. Many parents and grandparents have taken on similar burdens by co-signing loans to help their children.
It’s easy to imagine a young person with huge student debt struggling and often failing to get out by turning their frustration inward. Stuck between low wages, expensive loan payments and high rents, they look in the mirror and see failure. This could explain why the rates of anxiety and depression are so high among young people today.
In the richest country in the world, you shouldn’t have to incur tens of thousands of dollars in debt just to start your working life. There is more than enough wealth in this country to support free or affordable higher education for all – it is simply being concentrated in fewer and fewer hands at a breakneck rate.
As a 2018 study I co-authored for the Institute for Policy Studies pointed out, three wealthy dynastic families – the Waltons, Kochs and Marseilles – have seen their wealth increase by nearly 6,000% since then. 1982. The median household during the same period saw their wealth drop by 3%.
Investing in student debt relief would have an extremely beneficial democratizing effect for young people and middle income earners. It would also be beneficial for society as a whole. After all, student debt is different from credit card debt or car loan debt.
More education has the added benefits of better informed citizenship, a necessity for democracy. And it forms the basis of a more advanced economy capable of better coping with the growing crises of climate change and economic inequalities. Debt-financed cars or televisions don’t have quite the same potential for large-scale social improvement.
And for the families of those who go to school, there is the clear benefit of a potentially better job.
Solving the debt and inequality crises will require much more than debt relief for young people. For this reason, young voters are also turning to “Medicare for All” and job creation policies like the Green New Deal.
Yet debt relief would have a huge impact, and much sooner. Unlock the potential of our young people – and the workers who run our economy. Forgive student debt.
Josh Hoxie is an associate researcher at the Institute for Policy Studies. He wrote this for InsideSources.com.
NO: Take a student loan, repay the student loan
By Neal McCluskey
You take out a student loan, you pay off your student loan. This should be the obvious basic understanding of how student loans work. There may be times when this shouldn’t apply, but against presidential contenders Bernie Sanders and Elizabeth Warren those times should be rare and depend on specific circumstances.
Federal loans represented approximately 88% of the total student loan volume in the 2018-19 school year. Let’s be clear about what they are doing: giving taxpayer money to students so that recipients can graduate and dramatically increase their income for life.
Georgetown University’s Center on Education and the Workforce has estimated that the typical person who completes formal education with a bachelor’s degree will earn about $ 1 million more over their lifetime than someone who completes their degree. secondary studies. That’s a big payoff, and there’s no justification for forcing taxpayers to eat up the associated debt, which for the 69% of 2018 graduates in debt was $ 29,800 on average.
What would forgiveness on a large scale be? Steal Peter directly to enrich Paul.
Such a forgiveness would not only be morally wrong, it would exacerbate many huge problems in higher education, ranging from soaring price inflation – the more people are able to pay, the more colleges can charge – to the race for armaments. If students think they won’t have to pay off their debt, why not agree to higher tuition fees for, say, a fancy water park on campus?
That said, there are two situations in which it may be reasonable to cancel loans, especially if they are private, but possibly even federal: when it is physically or financially impossible for borrowers to repay.
The physical inability to repay is easy to imagine. If someone has an accident and ends up with a disability that prevents them from working, or working at the level of pay they reasonably expected, it makes sense to forgo their loans. This applies whether the loans are federal or private – if one is rendered totally incapable of earning enough to repay, there is nothing reasonable to do.
What about financial failure? This one is harder if it does not follow from an act of God. If someone spends on luxuries or buys a house that’s too big and makes themselves unable to pay off their debts, they can file for bankruptcy, empowering a court to create a repayment plan that can pay off certain debts. But they really should remain responsible for what they owe – the situation was on their own.
In such a situation, student loans are more difficult to pay off than other debts such as credit card debt. For student debt, it must be shown that the repayment would create “undue hardship”, which is considered a high bar, even if it is poorly defined in the law.
For federal loans, it makes sense to have a high bar. These loans are made with money taken from taxpayers who had no choice in the matter. Making whole taxpayers should be a top priority.
Private loans are fundamentally different in that lenders are free to choose to do business with students and are prepared to reap profits. It is much more reasonable to make these loans dischargeable on terms similar to other debts. In fact, the more risks a lender takes, the more he is encouraged to rigorously assess the ability of a potential borrower to manage university work and to obtain the diploma which allows them to unlock large income. The benefit will trickle down to future borrowers, who will get an objective assessment of whether going to college is a good idea. The federal government, on the other hand, does not do such an assessment, willingly granting loans to millions of endless people struggling with debt.
Even with some rationale for making private loans easier to discharge in bankruptcy, the rules for existing loans should not be changed retroactively. Easier bankruptcy should only apply to loans issued after the reforms are passed, so lenders can adjust their policies and terms.
The standard for repaying student loans must conform to one fundamental – and frankly obvious – fairness: you take the loan, you pay it back. In rare circumstances, this may not be possible, and we should consider tweaking things such as bankruptcy laws. But the fact that one has to repay one’s debts shouldn’t be in the least controversial.
Neal McCluskey is the director of the Center for Educational Freedom at the Cato Institute. He wrote this for InsideSources.com.