Don’t Cancel Student Debt

Last week, the Biden Administration, nonsensically, extended college loan repayment forbearance until the end of the year. Never mind that the unemployment rate for college grads is barely 3%. And this may signal that Biden is moving to placate the hard-left by forgiving some amount of student debt outright.

This is a terrible idea. I graduated college and paid back my loan in full. But I guess I’m slow on the uptake. Here’s what you can help me understand.

A student does the following:

  1. Takes out a loan and knows, or should know, what the repayment schedule will look like.
  2. Chooses a major and knows, or should know, approximately what a career flowing from that major will pay.
  3. Signs a contract promising to repay the loan.
  4. Goes on to get an education, which promises to teach him how to gather information, think critically and rationally, and draw reasonable conclusions.
  5. And, yet, now that student believes that taxpayers, most of whom didn’t go to college or did and paid back their loans, should pay off their loans for them.
You chose a major. You took out a loan. You promised to pay it back. Now you have to make the payments. Welcome to adulthood.

I am at a total loss to understand how the hard-left thinks this is progressive. Those who got a four-year degree earn, on average, twice as much as high school graduates. Paying off $50,000 in debt, as Sen. Elizabeth Warren has proposed, would cost about $1 trillion. Paying off $10,000, as Pres. Biden wants to do, would cost $373 billion. By contrast, a truly good idea, the expanded child tax credit which reduced childhood poverty by half, will cost about $160 billion a year, or much less than half of even Biden’s less ambitious student debt plan.

And yet, two-thirds of adult Americans did not go to college at all or complete a four-year degree. Where’s the fairness in asking them to pay back the loans of those earning so much more?

And then there’s the issue of what happens next. So, we pay off everybody’s outstanding loan balance — regardless of need. What happens next year when a new crop of grads hits the streets with a new boat load of loans to repay? Won’t the problem just restart then? And if we pay off those loans, if you’re a college freshman won’t you just take out all the loans you want in the belief that you won’t ever have to pay them back?

An argument made by supporters of debt cancellation is that the costs of college have increased dramatically in the last few decades. That’s true. The cost of tuition has gone up 213% over 30 years. But the same argument could be made for the cost of buying a car. In fact, a new car today costs a little less than three times as much as one purchased three decades ago. Should we cancel all car loans?

Actually, as bad an idea as that might be, it’s better than cancelling student debt. The total amount of car debt held by Americans is pretty close to the amount of student debt they hold. And, since people from all walks of life have car loans, chances are that forgiving car debt would be more equitable than cancelling student debt.

Paying off car debt would be like paying off student in at least one way. Would it be fair to cancel $50,000 in debt on a Mercedes just the same as $20,000 in debt on a Chevy? Of course not. And it wouldn’t be fair to forgive the debt on a valuable Harvard education just the same as money owed on debt from an obscure public university.

Let me finish with a true story. I know a guy who was a very smart kid. He graduated near the top of his class in high school and easily got accepted to the UW. But he liked to party and those opportunities do present themselves from time to time here in Madison. He washed out and took a job as a tiler. He worked hard in a physically (and intellectually) demanding job, and today he’s on the cusp of taking over his boss’ business. He’s a good father in a stable marriage with a nice bunch of kids. He pays his taxes and, if his business grows, he’ll be hiring people and creating jobs.

As I admitted at the top of this column, I guess I’m slow on the uptake here. But maybe somebody could explain to me why it’s a progressive thing for this guy to pay back the loans of some kid who majored in comparative literature, took out loans he knew he could never pay back, took a gap year in Europe, still earns twice as much as a high school graduate, and now thinks society owes him something.

Welcome to the 174th consecutive day of posts here at YSDA. Thanks for reading!

3 thoughts on “Don’t Cancel Student Debt

  1. An interesting essay and thought provoking. One approach might be to allow student loan debt to be subject to bankruptcy, so that those truly under water with student loans could seek to discharge the debt, or modify the debt and find a way to pay it off partially and over time. Additionally, there should be a form pf prosecution of the “pay to play” “schools” and diploma mills that set themselves up as colleges that received fraudulent windfalls of student loan cash (think Trump University and myriad other greater or lesser known BS schools that formed), and force these schools and their owners to pay back the billions wrongfully received from the academic “pay to play” schemes.

    Liked by 2 people

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