The Oddest Sort of Progressivism

Not only would student-debt forgiveness transfer money to the affluent and successful, it’s a casual assault on our foundational values.

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President-elect Biden is still more than two months from assuming office, but the socialist wing of the Democratic Party is already leaning on him to tear off his moderate coloration and reveal himself an ally of campus radicals. Last week, more than 200 progressive organizations—including the major teacher unions, the Education Trust, National Urban League, Young Invincibles, and Greenpeace—issued a letter calling on Biden to take executive action to unilaterally “cancel federal student debt on Day One” of his presidency, wiping out the $1.6 trillion in debt that borrowers owe to U.S. taxpayers. 

This is an awful idea, and not just because the projected cost is astronomical. If one were going to spend $1 trillion or more, one might imagine trying to direct it to hard-hit communities, families, and businesses. Instead, such a move would disproportionately benefit affluent families, since working class and low income households are much less likely to have attended college at all, or to have borrowed heavily to attend pricey schools. Indeed, more than 40 percent of student debt was accumulated during graduate study by doctors, lawyers, and other professionals in pursuit of lucrative credentials. 

Meanwhile, as I observed for The Dispatch back in September, it’s unclear just what problem this massive giveaway is intended to solve. For low- and middle-income students, generous financial aid policies mean that inflation-adjusted net annual tuition increased less than $600 between 1996 and 2016. As for loans, in a 2014 Brookings Institution analysis, researchers Beth Akers and Matt Chingos found, since 1992, the median borrower has consistently spent about 4 percent of monthly income repaying student loans. In a 2019 analysis of millennial households, Akers updated the numbers and calculated that the 4 percent rate still held. 

Median student debt is about $17,000. In other words, for the vast majority of borrowers, loans may be an annoyance—but they’re not a major obligation. Given that college graduates enjoy a big boost to lifetime earnings, often estimated to be about $1 million over the course of one’s working life, these policies seem geared to transfer huge sums to the Americans with the best financial prospects. There are some borrowers who are in dire straits due to specific circumstances, especially in the midst of a pandemic, but the sensible solution is to provide them with targeted relief. 

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  1. Joe

    I graduated in 2001 with about $55k in student debt. In 2002 I refinanced them into a 25 year loan. I paid them off this September, 7 years ahead of schedule. I have zero interest in paying off other people’s student loans after paying my own.

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  2. Matt C

    Biden has come out against the idea of using executive orders to forgive debt (thankfully). He has stated (following Schumer's comments on this issue) anything in this area will require Congressional approval. I think that should have been mentioned in this piece.

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    1. Matt C

      I do think this was a good article though. Outright debt forgiveness is not the answer, though I think reform is needed, and many of the comments elsewhere explore some of the options very creatively.

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    Will Bates

    Will Bates3 hr ago
    I am a liberal but a liberal with business sense, and the idea of outright loan forgiveness seems a very shortsighted one.

    The whole reason private schools are so expensive is we have completely removed the primary price-check force: supply and demand. When the price goes up by double-digit percentage points each year but demand also increases, it becomes a runaway train. Only incentive will put a ‘check’ on this train, and that means school attendance has to suffer...or tuition will become even more ridiculous.

    The way to drop attendance is to make state & community colleges even more appealing. That would also help the families most in need, who by large percentages tend toward those schools (especially community colleges.)

    Don’t forgive debt already accrued. Instead, make 2 years of community college free as part of our normal secondary school system. Then, add that the remaining 2 years of in-state school is subsidized substantially.

    Private schools get nothing. Private school students fight their own battle. Voila, competition.

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    1. Scott N.

      I think this has a lot of merit.

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  4. Matt D

    These type of things make me very selfish and I do not like it. But, no pension, high-deductible insurance, high daycare costs, major house loss with no forgiveness in 2008, and now we're going to add college loan forgiveness to the list? There's a lost generation here.

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    George.Skinner

    A more politically palatable form of student debt assistance would be to reduce or eliminate the interest on the repayments. Borrowers would still be responsible for the principal, so people could feel like there's still accountability for the borrower. However, a break on the interest payments could either help people repay their loans faster or get some fiscal breathing room by reducing their obligations. The challenge is that I suspect a lot of the progressive backers of total forgiveness would regard this as worse than nothings, in that inimitable reasoning often found in progressive activism.

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    1. Anne

      I’ve been wondering about this. Would there be a major downside?

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    George.Skinner

    It seems like a decade has been sufficient to forget that one of the triggers for the Tea Party movement was a backlash against government bail-outs (perceived or real) of people who were in default of their mortgages. Here were are 12 years later, another newly elected Democratic president, and again a Republican party reeling from a defeat during an economic crisis. TARP and the associated assistance packages were at least broad-based measures intended to prevent credit markets from freezing and having the economy plunge into a depression that would hurt everybody. Why would any sane Democrat implement a student loan forgiveness program that will give the Republicans a rallying point?

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  7. Boatbody

    If Biden does this, at the least get something serious in exchange for the forgiveness. In return for forgiving monies that educated (maybe) lawyers, accountants, nurses and doctors, have them give three years of the near future helping in rural and underserved areas of the country. At least they'll get a dose of realism to go along with the collegiate wokeism.

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    Patrick Roy

    I am 30 years old and graduated from my state college 9 years ago. Student loans at one time were a fairly large hinderance for me but that is no longer the case. Why? Because when I first graduated college I was less established then I am now. So those monthly payments at 22 were far more problematic then at 27. I would imagine this is the case for most college graduates.

    Democrats are correct that we need to look at the issues that student loans cause young people. The answer is not loan forgiveness however.

    The better solution (and easier) would be for federally backed loans to have a graduated scale for interest rates. When someone first graduates, interest rates start low (1-2.5%). After 4 or 5 years, they increase. 4 or 5 more years, they reach the level that they are at now.

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      rlritt

      Good plan.

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    Ed P

    I agree with the thesis here. But if you click through to the letter, the folks pushing this make a 3 part argument to justify their desired policy:

    1) "Student debt exacerbates existing racial inequities; cancellation will help reduce the racial wealth gap."
    2) "Cancellation will provide a much-needed economic stimulus. "
    3) "Federal student debt cancellation could have a positive impact on health outcomes."

    I think Mr Hess did justice refuting #2. I think #1 is where the progressive 'hook' is and it appears quite dubious to me. #3 also seems dubious. This would be a more effective piece if these arguments were addressed head on.

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    1. Joe

      There is no doubt that African Americans got a rotten deal in the American experience. But student debt forgiveness is a terrible way to address the consequences of centuries of systemic racism. It does nothing to help older African Americans and little to help younger African Americans who didn’t attend college.

      I believe that conservatives should put together concrete, plans to help African Americans - particularly African Americans living in economically depressed neighborhoods - to better participate in and enjoy the spoils of our mostly free market system.

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    2. Boatbody

      This is a good example of the lack of critical thinking in our colleges and our governments.

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    3. teddytruther

      I agree I'm less convinced by #2, but I'm also a little amused by conservatives now vociferously arguing against what is effectively a well-targeted implementation of trickle down economics. If you just called this a 'middle class tax cut', you'd get rapturous applause.

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      1. Boatbody

        No you wouldn't.

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      2. Peter

        Messaging sadly matters more then content, you are bringing that to light.

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        Jonathan Crymes

        Republicans are traditionally mostly interested in cutting taxes on the wealthy— not the middle class. If Biden et al want to forgive student debt they would need to package it with a big tax cut for corporations or the wealthy. That would probably make it appealing to congressional Republicans.

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        1. Boatbody

          I'm a Repub and not interested in cutting taxes on the wealthy. My goal is to get wealthy enough so I can complain about taxes!

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  10. Scroop Moth

    Student-debt forgiveness will improve our social bonds by increasing the obligations of elites to society and validating society's expectations of elites to serve the public interest. Public financing will increase the public's sense of ownership and pride in higher education. It will empower some poor students to pursue studies that don't lead to high pay.

    The $1 trillion has already been spent. Debt forgiveness is just component of our future commitment to higher education -- analogous to the way we sent Social Security checks to the first recipients who never paid into the system. But if the concept of moral risk is indigestible to conservatives, how about compromising by treating forgiven debt as income and collecting income taxes? Our modern notions of debt are not the last word in morality. There's an ancient prohibition against collecting interest and principal from consumers who can't pay. I think we need to give young people a break from educational debt. It's a win-win business deal. If the students become billionaires, we can make them pay far more in taxes than we ever paid in tuition subsidies.

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      rlritt

      I agree

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    2. Boatbody

      Scoop Moth -- in the immortal words of Al Pacino in "Scent of a Woman," ".... if i was younger I'd take a flame-thrower to this place!!" Still the best idea of reform of higher education that I can think of.

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