Student loan debt, now approaching $1.5 trillion (which is not dischargeable in bankruptcy), is a burden affecting 43 million Americans. One effort to ease this burden is the Students Over Special Interests Act, a bill making its way through the US House of Representatives. The bill would “forgive the outstanding balance of interest and principal due on all eligible Federal student loans.”
But is this really a good idea? Lately, there have been some very public arguments that forgiving all student debt would be a handout to the upper middle class.
Let’s give this some perspective.
First, since 1976 college cost has risen 148% while median household income has risen only 21%.
Second, of the 43 million people who owe student debt, women are disproportionately affected by the student loan crisis, holding 2/3 ($890 billion) of outstanding student debt, historically taking on a higher debt burden than men. Why? Simple, many are financing the cost of daycare for their children while earning a degree. Plus, they make $0.75 for every $1 a white man makes (or $0.66 if they are women of color). That makes paying for college a bit tougher. So while they’re pulling themselves up by their bootstraps, they’re also trapping themselves in a cycle of debt.
The same can’t be said about corporations.
The recently-passed Tax Cuts and Jobs Act of 2017 cost $1.9 trillion, mostly in the form of welfare (tax cuts) for corporations. It would actually cost less to eliminate all the student debt in the country.
One argument against universal student debt elimination is that, because higher earners hold a greater share of outstanding debt, it would be a “giant welfare program for the upper middle class,” and would be counterproductive.
This is not true. According to the Student Debt Cancellation Report 2018 by the Levy Economics Institute, debt elimination could increase GDP by roughly $100 billion per year over the next 10 years. America would also see a reduction in the unemployment rate, with job creation expanding by over 1 million new jobs per year just after the policy goes into effect.
Furthermore, society benefits from an educated populace who are not pressured to take jobs serving corporate interests in order to pay back their student loans. Job choice in higher earning fields like medicine or law is influenced by the amount of debt a person has upon graduation. With less student debt, doctors may choose to go into family practice or prevention instead of entering a specialty field; lawyers could choose public service practice over corporate law.
One can argue that people have a choice of whether to go into public service by pointing to the Public Service Loan Forgiveness program which allows borrowers to eliminate their student debt after 10 years of payments while working for a non-profit or government entity. But here’s the kicker, 99.68% of people who applied for forgiveness under PSLF were rejected because of technicalities (only 96 out of 30,000 were approved).
Consumer safety is an additional consideration. The Department of Education has eliminated protections, one of which gave borrowers 60 days to catch up if they went into default. Also, the federal government contracts with for-profit student loan servicers that deceive borrowers in order to boost their bottom line.
The solution to the student loan debt crisis that offers the most benefit to society is turning the Students Over Special Interests bill into law. In our increasingly complex world, going to college is not a privilege, it is a necessity. Unfortunately, this country values only education, not the educated.