Student loan forgiveness plans are gaining steam, especially as Democrats take control of all three branches of the federal government. But underlying student debt is an issue few want to talk about: the problem of college cost. Can you guess which of these three statements about loan forgiveness is a lie?

A. Student loan debt is becoming a large crisis for millions of younger Americans.
B. The taxpayer is already on the hook for unpaid student loans.
C. Student loan forgiveness is a way to help out working class Americans.

Let’s take these statements one at a time.

A. TRUTH! The student debt crisis is enormous. One in six Americans (one in three under 30) has student loans, an those loans amount to about $1.7 trillion outstanding, outstripping both car and credit card debt. Just over half of those loans are in any kind of repayment, which includes those taking advantage of federal programs pegging lowered payments to their incomes, meaning that for a lot of people, student loan payments are just not feasible. Even before the pandemic and current economic downturn, 40 percent of these loans are expected to be in default just a couple years from now.

The primary reason for escalating and unpayable student loan debt is simple: college simply costs much more than it used to. Public universities have raised their tuition by about 300 percent over the past three decades (adjusted for inflation) while private universities have an even steeper cost curve upwards. When it often costs upward of six figures to pay for tuition, textbooks, and living expenses, it’s easy to see why student loan debt has become unsustainable for a lot of Americans.

B. TRUTH! Uncle Sam holds the vast majority – upwards of 90 percent – of student loan debt. Under the Obama administration, the federal government cut out the quasi-private, Fannie and Freddie-style private banks as the middleman, and the Department of Education now originates and holds the overwhelming number of student loans. This means that when students default or cannot pay, we are all picking up the tab.

Unfortunately, the government’s involvement in student loans, initially intended to ensure that the less well-off would have access to college, have created the upward cost spiral that is crushing graduates. For every subsidized student loan dollar a university receives, its price increases by 60 cents. Add that up over the decades, and federal loans have created a situation in which every high school graduate becomes a walking six-figure check to the university sector, encouraging the lowering of academic standards and admission of those the university knows are unlikely to graduate (only 60 percent of incoming freshmen graduate in six years).

C. LIE! Student debt is a crisis, but its primarily a crisis of the middle-to-upper classes. The top fifth of income earners holds $3 in student debt for every $1 held by the lowest fifth, and about a quarter of debt holders have a medical or legal degree, who make up less than one percent of the population. Worse, the subsidization of the pathway to college – through federally-backed student loans – creates a “credentialing treadmill” for jobs that once didn’t require a four-year degree, making things harder on the majority of Americans without one.

Student loan debt is holding back a lot of young Americans, but student loan forgiveness does nothing to stop the underlying college cost crisis. In fact, it makes it worse by allowing universities to continue to raise prices year over year, and forcing their students to take out ever-larger federal loans, knowing it will all be forgiven by the taxpayer on the back end. Instead, we should look for creative ways to bring down college costs, incentivize alternative routes to professional and personal success, and lower the debt burden on students.