Democrats are pushing student loan forgiveness hard currently, gaining momentum with President Joe Biden saying he supports it. I’m buried in law school loans, due to the left canceling my legal career so I can no longer make a high income as a lawyer. I put off having children because of the huge debt, never ended up having any, and I work multiple jobs and don’t own a home. But that’s not something taxpayers should be responsible for rectifying.
There are many sad stories about financial problems that are far more sympathetic, so why should we select primarily affluent, white young adults who will be the main ones to benefit from this? The top fifth of households hold $3 in student loans for every $1 held by the bottom fifth, so higher-income Americans would benefit far more than lower-income debtors.
The Biden administration is eyeing salary caps that are pretty high, $125,000 or $150,000 as an individual or $250,000 or $300,000 for couples who file taxes together. Sens. Elizabeth Warner and Chuck Schumer want to cancel $50,000 in federal student loan debt per borrower, although Biden prefers $10,000. The vast majority of those graduating from college have significant debt; 70 percent of college graduates in 2014 had student debt averaging $33,000. The student loan default rate is 11%, or 5 million borrowers.
Why should the 45 million Americans with federal student loan debt get relief, while 255 million Americans do not? Student loan debt is less sympathetic than many other types of debt, because the person got a benefit that allows them to make more money. All those blue-collar folks out there who never got this advantage would have to pay for others who got the advantage, which is brutally unfair. People without college degrees got hit twice as hard with unemployment during COVID-19, with an unemployment rate of 8.1% compared to 4.2% for those with college degrees.
And 40% of all student loan debt is from graduate school. So not only do many of those students have a perfectly good first degree that they have earned and paid for, putting them in an advantageous situation over others who didn’t go to college, the degree they want paid off gets them even further ahead financially.
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There’s a never-ending list of more sympathetic debt that could be forgiven. What about mortgage debt, which affects far more Americans? Mortgage debt can’t be easily discharged in bankruptcy — borrowers are expected to continue making payments if they want to keep their house. What about credit card debt? What about a spouse who fraudulently foists debt on their spouse, but there’s no way to collect it after divorce since the jerk can’t hold a job or hides their income? Or medical debt, someone who got cancer through no fault of their own?
And what about all the new borrowers after this? We’ll be right back in the same boat, with even more demand for student loans since borrowers know there’s a good chance they’ll be forgiven again, and universities will brazenly hike tuition knowing the government will bail out the students.
So what’s the solution? Some controversial solutions include making student loans dischargeable in bankruptcy, limiting the amount of graduate school loans that can be taken out, having debtors perform public service to pay them down, such as serving in a civilian corps (there’s already a small voluntary semblance of this in place), and tying financial aid to average future earnings with that degree. Maybe universities shouldn’t be tax-free.
Making tuition “free” isn’t a good solution, because taxpayers would end up paying for it. Some compare bailing out student loan debt to bailing out the banks in the 2008 recession. But that wasn’t a good idea either. The only worthwhile observation there is that it is unfair to charge higher interest rates to students than to banks that get bailouts.
Universities do charge too much for tuition. Arizona Attorney General Mark Brnovich sued ASU for increasing tuition by over 300% within just a few years. The Arizona Constitution says higher ed tuition at public schools shall be “as nearly free as possible.” Why would we enable and essentially reward universities for overcharging tuition? But so far, the powerful law firms representing ASU have thwarted the lawsuit. Brnovich also sued successfully over higher ed offering in-state tuition to illegal immigrants.
Laws already provide for very generous income-based repayment plans, with zero payments for the lowest income borrowers. And those in public service jobs just need to make payments for 10 years to have their entire debt forgiven. But 43% of borrowers do not know about these plans — why aren’t Warren and Schumer talking about these options? And the public service program has provided a glimpse of how it’s not the low earners who are benefiting, it’s those getting advanced degrees who are taking advantage of it the most. Former President Donald Trump called to end it.
The federal government paused federal student loan payments at the beginning of the pandemic in March 2020, which has been extended through August 31 this year so far. So there won’t be any stimulus to the economy from forgiveness since so many debtors are currently not paying. And let’s not forget that a lot of people with student loan debt already are getting away with not paying the debt by going into default. Lenders rarely come after former students once the loans go into default, and when they do, it’s even rarer that drastic action is taken like sending them to jail.
Don’t listen to the spin about “making life easier for Americans.” It’s really just playing Santa Claus for Americans at the forcible expense of other Americans. There are plenty of good-paying jobs available, many people just refuse to take them. It comes down to Democrats wanting votes from the almost one-fifth of Americans with federal student loan debt. As playwright George Bernard Shaw said, "A government which robs Peter to pay Paul can always depend on the support of Paul."
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