Solving America’s Student Debt Problem

During his Presidential campaign Joe Biden promised to cancel student debt, often speaking of roughly $10,000 per student debtor to start.  Other Democrats, such as Senator Elizabeth Warren, have jumped that suggested loan cancellation up to $50,000.  Senator Bernie Sanders, on the other hand, is interested in the whole enchilada: He wants all $1.75 trillion of outstanding student debt cancelled immediately.

Needless to say, these ideas have been the source of some degree of controversy, and every time Joe Biden pushes the date for the restart of student loan repayments even further into the future, more questions are raised about the justice of giving debtors break after break after break—much less loan forgiveness.

Reasonable people point out the intrinsic unfairness of using heretofore unprecedented federal powers to forestall—or eliminate—the collection of one particular type of debt.  Why not institute a holiday on mortgage debt or rents? Perhaps everyone deserves a year or so of interest-free grace on their credit card payments? Auto loans and medical bills are a drag on household budgets, so why doesn’t Joe Biden wave his magic wand and make those disappear for awhile?  After all, if any of these debts were deferred or cancelled altogether, the lives of those thus privileged would improve immeasurably, so why should student debt be singled out for special consideration?

The answer to the question of why student debt deferral and cancellation preoccupies so many Democrats is actually quite obvious.

The attraction of getting young adults off the hook for student loans is that the mostly white, college-educated cohort who thought it was a great idea to go into massive debt for that Sociology or Gender Studies degree is a core Democratic constituency that planted nary a yard sign for the Trump/Pence ticket in 2020.  If these voters become discouraged and stay home for the 2022 midterms, the Bidenistas are looking at an electoral wipeout of truly monumental proportions—and the the Progressive political agenda will be dead.  Vote buying is far from dead in America, particularly when you can do it on the taxpayers dime, so the cries for student loan relief will grow louder in the months ahead.

Student loan deferral and cancellation are fairly obvious and necessary horse trades for worried Democrats, but it doesn’t mean these politically-driven ideas lack any merit whatsoever.  If we look beyond the partisan intentions, we can begin to examine what is right and wrong—and fair and unfair—within these discussions regarding indebtedness and responsibility.

First off, we must clearly and forcefully acknowledge that federally-managed student loan programs have been a disastrously misguided attempt to make higher education affordable.  The idea that you could brighten the futures of young people by insisting they go deeply into debt was fatally flawed from the outset and refusing to admit this grotesque policy error is wrongheaded.  

Just as government efforts to make housing more affordable by making it idiotically easy to go into mortgage debt have driven up the costs of housing, so has the student loan debacle effectively erased price discipline from the higher education marketplace.  Colleges and universities were left free to raise tuition, room, and board—and they have—without a care in the world because students were able to borrow the money needed to cover the spiraling costs of their increasingly overpriced degrees.  

The net result of this student loan idiocy has been a lot of very wealthy and happy academic administrators, professors, and other professionals strolling blissfully across their lovely campuses while their former students are left working three jobs and living on ramen noodles.

To paraphrase Winston Churchill, “Never was so much owed by so many to line the pockets of so few.”

Given that the promises behind the federal student loan program were illusory—and cruelly took advantage of the dreams of the roughly 43 million Americans who are still trying to pay off their student loans—some consideration must be given to providing relief for those whose only crime was hoping for a brighter future.

Some student loan relief is certainly justified, but this must, first and foremost, be tied to programs that ruthlessly trim away the administrative fat and inflated salaries at America’s colleges and universities in order to improve affordability going forward.  

Given that those who actually do the teaching now comprise a distinct minority of the staff on most campuses—we are living in the Golden Age for Associate Deans—a better balance between those who do the work of educating students and those who fill their empty days engaging in all manner of “adminis-trivia” must be enforced alongside any targeted loan forgiveness programs.  In addition, caps on campus salaries must be instituted as a condition for any institution of higher education being allowed to continue to participate in federal student loan programs.  If colleges are going to pay their administrators like bankers, they cannot expect their students to live in poverty to cover the paychecks.

In order to reduce student indebtedness in the future, the best solution is that the costs of a college, graduate, and professional degrees must come down—way down.  

Since I graduated from college in 1980, it is estimated that the price for college tuition and fees has risen over 1,000%, an astounding rise far, far beyond the rate of inflation for other goods and services during the same time period.  It is clear that the easy availability of federally guaranteed student loans has resulted in a frenzied cash grab that has grievously harmed the futures of Americans by transforming college from a possibility into a supposed necessity, with colleges and universities luring vast numbers of students into debt that was both unnecessary and damaging to their long-term futures.  

The marketing mantra of “College for All” became an excuse to fleece credulous students and their loving parents by selling indebtedness as a pathway to a better life.

So what do we do now to help those students and parents suckered by colleges, universities—and their own government?

It is unreasonable to forgive all student debt because it is a slap in the face to those who worked to repay their loans and those who struggle to pay other kinds of debts that are not held by a cherished Democratic constituency.  However, if we choose to recognize the folly of herding several generations of hopeful young adults into a grotesque financial trap, we can perhaps identify strategies for relieving some of the student debt burdens now strangling the futures of many millions of Americans.

Not all debtors are, of course, alike.  Many have made a good faith effort to repay their obligations; other borrowers have shrugged off their responsibilities.  Some student loan borrowers have successfully parlayed their educations into well-paying careers; others continue to struggle with financial hardships that include bankruptcies.  Some borrowers are younger and have long careers of work ahead of them; others are retired and being forced to make room in their budgets for a student loan payment in addition to the escalating medical expenses associated with old age.

What ties all borrowers together, however, is that all decided to heed the best advice of their government, parents, teachers, mentors, and others and seek educational opportunities that they believed would ultimately improve their lives.  Few suspected that higher education was in the process of transforming itself—with the help of all those lovely borrowed student dollars—into an expansive economic enterprise where actual education many times became a secondary consideration.  Given that, for example, college presidents invariably make far more—sometimes millions more—than the Governors and other elected officials in their states, it might not be out of line to suggest that their students deserve a break.

Just how much loan forgiveness might be fair and reasonable is, of course, a fraught issue, but some relief is clearly necessary.  For those borrowers in good standing—particularly those who have loans of long duration—a one time write off of $20,000 might be a palatable solution to balancing the public good with the private pain inflicted by a federal program that was ill-conceived from the start.  Beyond this, it is hard to see the sense or justice in bailing out those who took on monstrous student debts.  Government should provide some compensation when citizens are harmed by a mistake, but it it is not the function of government to bail out smart people who have made stupid decisions with their lives.  

Moreover, it must ultimately be the responsibility of colleges and universities to provide some additional relief for graduates who were encouraged to pursue degrees—often at great expense—that have little or no economic utility.  Colleges that offer clearly non-remunerative majors must bear some financial responsibility for the problems later faced by their graduates, and they must be more open with current and future majors in these dead end degrees, counseling students to think twice before agreeing to run themselves into debt in pursuit of these studies.  

This might be painful for college administrators who might have to take a pay cut—or lose their cushy jobs—in order to free up the funds necessary to compensate those who were led into a debt trap, but this kind of reckoning is a necessary component of the foundational reforms and reorganization that will be required to reduce the outrageous costs associated with higher education in America today.  We can no longer support a bloated system that bankrupts both our students and our nation’s future.

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