Canceling Student Loan Debt Is a Terrible Idea

President Biden is reportedly weighing an executive order that would attempt to cancel some or all of the $1.6 trillion in federal student loan debt. Leading congressional Democrats have endorsed a full forgiveness of all federal and private student loans. I can relate to these relief demands—my own family will be paying off student loans well into our 50s. Nonetheless, student loan forgiveness would be an unnecessary and destructive policy for the following reasons:

Student Debt is Not a ‘Crisis’

The student loan “crisis” is primarily a manifestation of the progressive bubble—young, urban, college-educated professionals who are dealing with the high cost of rent, child care, and student loans. This includes the legislative and campaign staff of progressive politicians (and sometimes the politicians themselves!), who surely see their own self-interest in framing their personal finances as a crisis. Outside this bubble, student loan repayments are most often a manageable annoyance.

According to education expert Beth Akers, two-thirds of millennials carry no student debt because they did not attend college or were able to avoid loans. Of those who did borrow, the typical student graduates with a $30,000 student loan for a bachelor’s degree that will raise average lifetime incomes anywhere from $1 million to $2.8 million (although these returns vary widely with the major). This is an enormous return on investment. This $30,000 loan with a 4 percent interest rate would require monthly payments of $182 for 20 years, or approximately 4 percent of the typical earnings. Only 6 percent of student borrowers take out more than $100,000 in loans, and they are heavily concentrated in law school and medical school. In fact, 40 percent of all student debt was borrowed for graduate and professional programs, which represent investments in even higher lifetime incomes.

The small percentage of overly burdensome student loans generally consist of: 1) graduates of medical, law, or business schools who can expect much higher lifetime earnings; 2) expensive graduate degree holders in liberal arts fields with an uncertain job outlook; and 3) those who take out loans but never graduate.

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Comments (71)
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  • This article combined with Dave Bahnsen’s is a one-two punch that knocks the teeth out of this student debt cancellation idea. Of all the ways Biden could have tried to curry to the base, this seems like one of the dumbest.

  • Canceling student college debt is the Democratic Party reveling their true base- mostly white, bourgeois losers who want to rip of the vulnerable people they claim to protect.

  • My blue collar sons shouldn't have to pay off some rich kids debt. Put the screws to the schools for the high costs- and the gov needs to get out of student loan biz. Maybe kids should have to do some mandatory military or Peace Corp term to get some $.

  • Completely agree with the points made. Well said.

  • Fantastic article. I've individually seen all of these points before, but you summarize each point efficiently and share pertinent statistics.

    This is the sort of article worth sharing.

  • Few people understand that the elite college experience is brand shopping. People want transportation then buy a new Mercedes not a slightly pre owned (or is it used?) Nissan. The brand brings perceived prestige and expected privilege.

    Then they can’t pay for it and even though they had a lead part in the decision are upset because no one told them it was too expensive based on their income. But it was impressive at parties.

    The elite brands are for the few who can afford it but the sellers (elite schools) will still advertise it to all to keep demand high and supply is always limited - simple pricing fundamentals of Econ 101 for pricing power.

  • My understanding is it is only $10,000. Having paid 100,000 + for each of my 2 kids, I'd say that amt would cover a couple of courses. So it's more of feel good gesture than an actual dismissal of college debt. I don't know why this is happening since there are tons of jobs and wages are high. Most people getting out of college could easily get a job.

  • "Attendees of for-profit colleges also have higher default rates."

    This is really true. I taught at two different for profit schools. And I was shocked. The teachers do care about the students, but except for trade schools, most of the for profit schools teach students what they should have learned in high school. These students are not being prepared for a skilled job in an office. Most of the students have very poor math and reading skills and are dropouts with a GED. They would have a very hard time getting a job in an office except as maybe a receptionist or file clerk even with a degree from a for profit school. They take out huge loans they can never hope to pay back even if they get hired for full time. It's a racket, just like Trump University.

  • I don't understand people who get themselves into huge debt for a grad program. There's no reason to accumulate a lot of debt in grad studies unless you're getting a professional credential that leads to a lucrative career. A decent grad program should be accompanied by assistance like grants, fellowships, or teaching/research assistantships. If that funding isn't offered, it's a red flag that it's either not a particularly lucrative field or that you're not a particularly promising candidate. If you can afford the grad program without assistance or going into serious debt, go for it. However, I just can't muster a lot of sympathy for people who spend years and rack up huge expenses getting a grad degree in a field where the best career option is becoming an academic teaching that subject. Planning to become a professor is the university student's equivalent of a teenager planning to become a rock star or star athlete. If you're preternaturally talented, you've got a decent shot. For everybody else, it means working menial service jobs until reality finally crushes your illusions.

    1. Yes! When I went to grad school - more than 20 yrs ago - there was no shortage of people cautioning me about the PhD job market (the serfdom of adjunct faculty, the limited job openings, the limited turnover of tenured positions, the hollowing out of certain humanities departments), but I wanted to try it. Once I was in the program, that grim reality started to settle on me and I realized that I was not such a superstar or otherwise dazzling job candidate that I could meaningfully change that reality. So I made the hard decision to give up that dream and move onto something much more prosaic.

      If I'd thought I could simply shift my debt burden to the taxpayer down the road, I might have chosen otherwise.

      But let me reemphasize this point: The low income ceiling, limited job prospects, and long odds of securing the sort of positions necessary to comfortably repay non-professional grad school indebtedness ARE NOT SECRETS. These are known facts and have been so for many years. Ignoring them is a choice.

      By no means am I against remedying the student debt "problem," but that problem goes to the structure of our educational institutions and their manner of funding, not to the decisions adults make to take on debt.

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