The staggering student loan debt in this country – estimated at around $ 1.6 trillion – is thwarting much of its young population. Many borrowers delay starting a family because they cannot afford the expense of raising children. They also don’t buy homes or cars, which would stimulate the economy.
This has led some advocates to call for debt cancellation, with President-elect Joe Biden pledging during his campaign to write off up to $ 10,000 for each borrower. More and more Liberal Democrats are fighting for up to $ 50,000, and the Progressive Wing says all existing debts should be canceled.
Such a rescue plan would, however, be extremely costly; to forgive up to $ 50,000 would cost around $ 1,000 billion. A disproportionate amount of this relief would go to the highest paid earners, who are more likely to attend college, especially a private college. And the money would only help this crop of debtors. Future students would still be hooked.
There are many ways to provide relief to borrowers, but a blanket rebate would be the least fair and cost effective. Instead, the government should help graduates most in need, those who lost their income during the pandemic, and those who took steps to reduce their debt by attending public colleges and working through their university years. And that should fix an existing program that wasn’t working at all.
Advocates of debt cancellation say that higher education is a public good, so its cost should be borne by society which benefits from a well-educated population.
This may be true, but in this case, what is needed is to tackle the cause of student debt, not the symptoms: it costs more to offer a university education in this area. countries than almost anywhere else in the world.
Many countries in Europe can offer free or very low cost college education because they not only offer increased public support, but also control costs. Students in Europe and Canada are much more likely than Americans to live at home and attend school; the classes are much larger, the sports teams much fewer and the ancillary services much rarer.
Canceling a loan also raises questions of inherent fairness. People who acted particularly cautiously – for example, by attending cheaper schools and limiting their borrowing – are the ones who would end up receiving little or no help.
Of course, there are low-income students for whom no frugality would allow them to complete their college education without a loan – and these are the people who need the help the most.
Therefore, need-based relief, rather than blanket forgiveness, is both prudent and justified. But the Biden administration should also consider other ways to reduce the debt burden without going broke.
The existing civil service loan forgiveness program cancels the debt held by students who engage in government or nonprofit work after they have paid off their loans for 10 years. But the program was a mess. People were paying off the wrong types of loans without realizing it, were misled into thinking they had a loan that could be canceled, and in many cases their requests for relief were wrongly turned down. The first point of the matter should be to solve this problem.
Again, forgiving student debt is a short term solution. Ultimately, the answer lies in preventing overwhelming debt in the first place.
Los Angeles Times