This month, millions of Americans will resume payments on their student loan debts—or attempt to. With $1.7 trillion outstanding, student loans have now outstripped all other forms of debt except home mortgages and saddled a generation and a half of young people with an unsustainable burden before they even get their start in the workforce.
The resumption of student loan payments after a long pandemic hiatus will worsen household finances for many families already stretched thin or spending on credit due to inflation and the generally poor economic outlook. But asking the majority of Americans without college degrees, or those who sacrificed for decades to pay off expensive loans, to bail out the current debtors is an unfair solution that doesn’t solve the problem going forward.
Instead, we should ask the universities that have benefited from student loan programs to foot their fair share of debt forgiveness. That’s why we at Independent Women’s Forum have proposed a tax on university endowments and other assets to fund a loan forgiveness plan for struggling students.
While it’s true that high school graduates are adults and responsible in some sense for the debts they have incurred, the reality is that our public policy choices have both made it more expensive to get a degree and more difficult to navigate the job market without one.
Students crushed by loans shouldn’t bear the brunt of bad policy
As the percentage of people with a bachelor’s degree rises due to huge government subsidies, companies have begun using the credential as a mere threshold marker that makes a job candidate likely to have basic competencies having nothing to do with what he or she learned in school. This employment practice—requiring a degree with an often six-figure price tag rather than some other demonstration of basic merit—is further encouraged by legal doctrines that look askance at other competency measures, like subject matter exams, that produce “disparate impacts” between racial groups (despite degree requirements also producing similar group disparities).
The result has been a runaway “credentialing treadmill” where getting to the same entry-level job open to enterprising high school graduates a generation ago now requires a degree, and corresponding debt that cannot be justified by the salary offered. Between that reality and the fact that the six-year graduation rate for four-year institutions is only 64 percent, leaving nearly half of aspiring students in the unenviable position of having student debt but no degree, pressure for debt forgiveness isn’t going away anytime soon.
President Biden’s party was likely helped in the midterms by a surge of young voters going to the polls after he announced his loan forgiveness plan, which was struck down by the Supreme Court months later.
The amount of forgiveness offered, and how loan balances could be reduced or refinanced through various forgiveness programs, is worth careful consideration. Lawmakers should design any loan forgiveness around strong incentives to pay back as much as a borrower can. But because of the way the student loan industry was nationalized, and because the federal government already owns 92 percent of student loans, any forgiveness requires a plan to raise the funds necessary without an unfair burden on taxpayers. A tax on universities, not general tax dollars, should satisfy this need.
The cost of a college degree isn’t matched by its value
The cost of a college degree today is simply not matched by its value, and universities have been able to skyrocket tuition well above inflation rates because of public investment in the form of federally backed loans and grants. For decades, we have propped up unsustainable university prices that are bad for students and bad for taxpayers. The only beneficiaries of this generosity have been the universities themselves, which have massively expanded their administrative job rolls and built millions of square feet of non-classroom use facilities.
Investing in higher education was supposed to make it easier for bright kids from impoverished backgrounds to launch themselves into their American Dreams.
Instead, 60 years of huge benefits to universities have resulted in a smaller proportion of students from the lower half of the income spectrum on campus, not larger. Universities have used taxpayer generosity instead to become the ideological gatekeepers of the professional class, credentialing an army of cultural revolutionaries who make our country neither wealthier nor wiser. The mechanic paying his taxes in Detroit does not owe a loan bailout to human resource managers in the Fortune 500.
Now that the bill for these decades of degree largesse has come due, it should be dropped firmly at the university door, and not at taxpayers’.