student debt

Let’s begin with the following three distinct scenarios…

Person number one: “When I was 17, I started looking at colleges. I wasn’t exactly sure what I wanted to do, but I knew getting a college education was important. I didn’t come from a lot of money; in fact, while my parents would help me get a loan, it was my responsibility to pay it back. I wasn’t thinking Ivy League or anything. I simply chose a small, nearby private school. Tuition was fairly reasonable, comparatively at the time — but still over $20K annually. I didn’t really know what I was doing, but securing loans was the only way continued education was possible. Several years later, no longer attending the college, I’m burdened by that debt now.”

Person number two: “I remember my parents sitting me down as a junior in high school. ‘You have a choice. We will allot you [this much] for college each year. But we believe you need skin in the game; people don’t value that which costs them nothing. Thus, we ask for you, too, to financially contribute.’ I then — fully knowing what I was going to pay — made the choice to attend an out-of-state, public university. I knew when I made that decision, that at current rates, I was going to graduate with a minimum of $100K of debt. I made the decision anyway. That’s where I wanted to go.”

And person number three: “I had no idea what I wanted to do after high school. Most of my friends were going to college, so I figured I might as well, too. But’s let’s be honest. I never was much of a serious student. I wasn’t a bad student; my grades/activities were solid. I just wasn’t motivated nor ambitious. So I followed my friends to a popular DI California school. I racked up a few hundred thousand dollars in student loans, bought a sweet, new car, and I kid you not — I had a fantastic social life! I actually never got a degree, no less. My spouse is wishing I would have been a little more responsible when I was younger, as we continue to make monthly payments on these loans now.”

Student loan forgiveness has become a debatable topic — relevant in the lives of each of the above. In recent days Pres. Biden has announced he is weighing forgiving some broad-based level of student loans via executive order. There is reasonable debate in what can be legally done absent congressional approval.

In order to have an accurate perspective of why this is a debatable topic, let’s insert a few facts into the conversation:

  • The average cost of college tuition has risen exponentially over the past 20 years.
  • Approximately 43.4 million borrowers have federal student loan debt.
  • The outstanding debt is approximately $1.7 trillion.
  • Nearly a third of that debt is held by the top 20% of earners.

Adding to the formation of our perspective are two other significant details. First, with inflation the highest it’s been in 40 years, what impact would broad student debt forgiveness have on inflation? Remember that the simplest definition of inflation is too much money chasing too few goods. Forgiving mass debt puts more money into the economy.

And second, only 12 years ago, no one outside the perceived political extremists pushed for large scale debt cancellation; most moderates advocated modest Pell Grant increases in order to account for rising college costs. Such was true for Pres. Obama; it was also true for then presidential candidates Hillary Clinton and Joe Biden. The Atlantic ran an insightful piece on the issue in June of 2019, reporting how the 2016 Democratic presidential debates between Clinton and Sen. Bernie Sanders highlighted this divide. Their editorial take was that the far left of the party had “radicalized” the issue.

As the Intramuralist has researched the issue with both diligence and candor, it’s been insightful to say the least. I sincerely struggle with this debate. Knowing debt forgiveness would negatively impact increasingly inimical inflation numbers, why would the administration pursue this effort now?

But there’s one more reason for the validity of the struggle. Each of the above mentioned persons are real. I spoke with each of them this past week. Some have debt, not recognizing at age 17/18 the implications of their choice; there was no lavishness. Others understood the long term implications; they knew and were prepared to assume responsibility for their choice. And still others squandered what they borrowed. All three of those scenarios (and no doubt more) exist. I can’t ignore the reality of any of the above scenarios.

I thus, find myself asking: is there a better way? 

The US Dept. of Education shared a report that federal borrowers already have an option for debt forgiveness; it takes diligence and time. A Wall Street Journal analysis of the report revealed that when the programs were first introduced, financial hardship was necessary to prove; such is no longer necessary. However, federal borrowers seem unaware, as only 30% of borrowers are taking advantage of the available plan. 

Prudent governing means we forge a way through that makes economic sense and recognizes each of the above scenarios. We must also remember that this, too, still doesn’t address the root issue. It’s not about student debt; it’s about college affordability. Where’s the accountability? Where, friends, is the better way?