Quote of the Day:

“I hate calling my loan provider every semester to get more funding. I despise seeing the value of my outstanding debt rise like an elevator, and if it were all to disappear tomorrow, that would be great for me. But the day after U.S. student debt is canceled, it would begin to build up again and keep increasing until the country is back where it started.”

–Blake Grisham in quoted in today’s Wall Street Journal

President-Elect Joe Biden is eyeing some form of cancellation of student loans. There are numerous ways student loan could be forgiven. Here are some.

Monday night, on Tucker Carlson, Public policy authority Oren Cass asked the (shall we say?) $64,000 question about student loan relief: Why student loans? Are students more deserving of debt relief than, say, struggling parents paying off an automobile loan?

When Senator Bernie Sanders put forward a bill to wipe out all student debt in June, Cass tweeted:

Hypothesis: student debt holders are, on average, less deserving or in need of a wealth transfer than is the median American (who doesn’t have a college degree).

It is an interesting hypothesis.   

If you worked hard and paid back your student debt, you might be loath to shoulder, through the inevitable higher taxes, the student loan of people who were less conscientious. Neal Bortz, tweeting in June, has admitted that he’s not thrilled at this prospect:

How do you feel about having some of your earnings seized to pay off a portion of a massive student loan made to someone with a gender studies degree? Feels good, doesn’t it?

President-Elect Biden, alas, can’t wave a magic wand and have college loan debt vanish. So, as Bortz points out, somebody will have to pay through higher taxes. When we talk about debt cancellation, what we are really talking about is shifting the burden to somebody else.

It is criminal that many young people, who may not know about money management, are encouraged to assume a huge burden of debt at an early age for college. I’m glad I grew up when college was less expensive.

If I’d had a loan to pay off, I could never have done a lot of things that have enriched my life (such as work at an alternative newspaper in New Orleans; I made almost nothing but it was bliss and a great preparation for the rest of my work life).

So, yes, college loans are holding a lot of people back and no doubt preventing them from taking advantage of low-paying jobs that provide valuable experience. Maybe there is a compromise idea that is at least worthy of consideration?  

Beth Akers, a senior fellow at the Manhattan Institute, and author of “Game of Loans: The Rhetoric and Reality of Student Debt,” proposes an compromise: forgive debt, but only a little. Not endorsing the idea, but it is intriguing.

First of all, Akers recognizes that large-scale forgiveness would benefit mostly the affluent, possibly at the expense of the less affluent. Akers writes:

Student-loan cancellation may be an appealing idea, but it would enrich the privileged and leave behind—or perhaps even drain money from—the truly needy. Progressive calls for President-elect Joe Biden to forgive student debt in his first 100 days of office should be ignored in lieu of a more moderate proposal: forgiveness capped at $5,000 of debt.

This more modest debt relief would actually benefit those who most need help:

Workers with a college degree are the highest paid in the economy and the last to get laid off during a downturn. Sure, having debt is worse than not having debt. But because of the large financial returns to postsecondary education, folks with debt and a degree are often better off than those who have neither. It’s clear in the data: Borrowers with the largest balances are the least likely to default. That’s because they’ve often invested in professional or graduate degrees that lead to careers with high earning potential.

Borrowers who owe less than $5,000 are the most likely to default. Many in this category started a degree but didn’t finish, and thus aren’t enjoying the higher earnings afforded by a degree.

A $5,000 debt relief would hit these people, and it could be done in a creative way: “a $5,000 student-loan jubilee in the form of a one-time tax credit.” Akers explains:

That would ensure that most borrowers who are truly up a creek can escape debt and move on with their lives. And such a proposal would buy the government the time, and perhaps the political leeway, to pass legislation that would streamline the existing student-loan repayment programs and ensure that struggling borrowers with large balances who are eligible would have the time to enroll in them. Washington could even expand those programs to require borrowers to pay a smaller fraction of their monthly income to loan repayment or allow debts to be forgiven sooner. At least these changes would ensure that dollars spent on loan relief flow to those that need them most.

More than half of Americans have built their lives and made ends meet without a college degree. Call universal student loan cancellation what it is: elitist.

There is another reason forgiveness won’t solve the problem: it is short-sighted.

We should find ways to end the ruinous college loan. We must find a way to make college costs responsive to market forces, and we must recognize the value of jobs that do not require a degree from a four-year college. That way fewer people who are unlikely to finish college will be suckered into taking out loans that will outlive their college careers.   

Saint Louis University finance student Blake Grisham, who struggles with his own mounting debt, summed up the problem: he despises his student loan debt, but, if such debt were cancelled tomorrow, here is what would happen:

[T]he day after U.S. student debt is canceled, it would begin to build up again and keep increasing until the country is back where it started.

The root of the issue is that colleges continue to raise their prices. This makes higher education inaccessible to lower- and middle-income students unless they take on ever-larger loans. If Joe Biden really wants to help, his administration should regulate the cost of higher education, capping it substantially below today’s level. No doubt it would upset college presidents, but does Mr. Biden want a solution or a Band-Aid? The choice is his.

Uh-oh. The last thing college needs is more government intervention in the form of regulation. How about a little free-market?