The student debt crisis is a burden on millions of Americans. But a bailout on the backs of taxpayers who didn’t go to college is regressive and unfair. Instead, we should send the bill for exploding loan debt where it belongs: with universities that have gotten rich and powerful by overcharging both their students and taxpayers.
How much do you know about student loan debt and taxing universities? Play “Two Truths and a Lie” to find out.
A. The biggest beneficiaries of student loan forgiveness are from lower-income backgrounds.
B. The student debt crisis is really a college cost crisis.
C. Universities helped create the student debt problem.
A. LIE! Universities have benefited the most from student loan programs, subsidies, and other taxpayer-funded programs, all while raising tuition for students well above inflation. Other than universities themselves, the biggest beneficiaries of student loan forgiveness are in the professional class, while people from lower-income backgrounds are simply being priced out of attending college at all. According to a study from the University of Chicago, full loan forgiveness would pay out only one dollar to the bottom quintile of the income spectrum, compared with seven dollars to the top quintile. Instead of helping students from low-income families, federal student loan programs helped price them out of universities. For every additional loan dollar the government approves, universities are free to raise their tuition.
B. TRUTH! Why has student loan debt gone from a responsible investment in one’s future to an unsustainable disaster in just a couple decades? In short, the answer is that the student debt crisis is really a college cost crisis. The cost of sending a child through college has soared radically above the rate of inflation—by 40 percentage points—for decades. At already high-tuition private institutions, costs have doubled between 1990 and 2020 in inflation-adjusted dollars, while at lower-tuition public schools, they’ve tripled. Add in the cost of living, expensive textbooks, and other expenses, and it’s easy to see how the typical 18-year-old cannot cover much of the bill even if he works part- or full-time while in school. College costs inflated this much because of a combination of policy decisions, including federal student loan programs, subsidies and incentives to get a four-year degree, and degree requirements for jobs.
C. TRUTH! While universities are reaping the benefits of all the advantages afforded to them under the status quo, the corresponding payback they’re delivering to their students, American taxpayers, and the country at large is declining or non-existent. Asking the majority of Americans without four-year degrees to pay off the loans of doctors and lawyers isn’t a just way to solve the problem. Instead of eating the cost of band-aid plans to prop up a system that already benefits elites at the expense of average Americans, we should solve the student debt crisis by demanding that the institutions which benefited from creating it foot the bill for the solution. We should tax universities to pay for student loan forgiveness.
Bottom Line: Universities earned their special status compared with businesses selling other goods and services by promising wide benefits to the whole society, promises they have not kept. Instead, they’ve become conduits to wealth and power on the backs of benefits granted by taxpayers and repaid them by making college unaffordable for the working and middle class and orchestrating a woke cultural revolution through their graduates. Universities helped create the student loan problem and have made life more difficult for 30 years of their graduates. Taxing them, rather than taxpayers, for student debt forgiveness is both the prudent and just solution to the student debt crisis.
Read the Policy Focus on taxing universities to learn more.