Canceling Student Debt Won’t Fix the Real Injustice in Higher Education

The runaway inflation in the cost of higher education is disproportionate to the benefits it provides.

As Joe Biden inches closer to the desperate political ploy of “debt forgiveness,” the evidence that this regressive wealth transfer is ill-begotten is becoming clearer from his own administration’s caveats to the decision.

We have a massive student loan market because the federal government made a decision to subsidize such a thing many years ago, with no consideration for underwriting. The ability and propensity of a borrower to pay a loan back is the essence of market-based lending. In the case of the student loan market, social aims were to trump economic logic, and this was an explicitly intentional decision. In 2008 the country got to live through the grand finale of the other time the federal government made this decision at scale. And while the systemic risks in our student debt situation are not in the same universe as the housing collapse (the debt is with the taxpayer, not the credit markets and banking system), the folly of the federal government dismissing economic logic for social (or political) aims is again on full display.

Much has been written about the regressive nature of “canceling” student debt—of how the benefits in doing this accrue to the least unemployed and best compensated members of society. The data are unambiguous—very little student debt is held by the lower rungs of wage earners. The concept of a social safety net for the desperate and most disadvantaged never envisioned five-figure transfer payments to those who possess the most sociological, professional, and economic leverage in society.