Editor’s Note: Below are four perspectives — two red and two blue — on President Biden’s recent executive action on student loan forgiveness.
Ellen Laird (Red):
My opinion piece contains no statistics. There are no quotes from esteemed economists, academicians or trendologists. It’s simply a story about a fellow citizen, communal values and fairness.
Kris is my friend. Because he was born into a dysfunctional family he ended up in five different foster homes and had a stint in juvenile detention. At age 19 he was married with a baby on the way. To support his family he took a job as an apprentice to a local electrician. He earned a HS degree at night and subsequently went to Community College night school for 7 years to obtain his BA in electrical engineering. Next, he got his Masters which took another 5-6 years and, currently, he is studying for his PhD all paid entirely from savings. Presently, he is SVP for a nationwide electrical company, has 4 children (all college graduates) and earns in the mid six figures.
Kris has never benefitted from Student Debt Forgiveness. He, like many others, made the decision not to attend a 4 year University full-time because he could not afford it. He chose to pay for his own education. Others have worked diligently to pay off college debt using savings and earnings. Should people who chose to pursue alternative opportunities i.e electricians, plumbers be told that the college educated are more valued citizens whose debt must be shared by all? Is it fair that the debt incurred by college graduates be the responsibility of people who chose a different financial or educational course of action?
We used to have an appreciation for the value of personal responsibility. Student Debt Forgiveness replaces that with an irreversible expectation that other people will pay for one’s life decisions. And, it would be foolish to think this slick ploy to “buy” votes will not be repeated in perpetuity. In my opinion, it will only breed resentment and not bode well for the future of our nation.
Randy Lioz (Blue):
With a fraught and divisive issue like canceling debt for a limited group of Americans, it’s best to start with some common ground. It seems there are few people in this country who see the current cost of college as reasonable, especially when the average yearly tuition has climbed to nearly $20,000, while in Europe most schools charge less than $2,225.
We tell American kids that college is the best route to a good job (indeed it often can be), yet we saddle them with debt that starts accruing interest before they leave school, at higher rates than mortgages (but with no similar protections against poorly structured loans that grow instead of shrink), are hard to refinance (especially without losing already meager consumer protections), and usually can’t be shed in bankruptcy. And those with loans suffer the same chance (2 in 5) that they won’t graduate as everyone else, but must keep the debt after, even if they were scammed by for-profit schools.
Something needs to be done, and this debt relief is not nearly enough. But should it also be cast aside just because it benefits us unevenly? There are plenty of other vulnerable groups, but relief shouldn’t wait until we address everyone else’s needs first.
Further inflation risk of relief is small. It’s currently driven by supply constraints and the unprecedented level of wealth we happened to accrue over the past 2 years—up over 35% overall and almost 40% for those with only a high school diploma. The money this break gives students is less than 0.2% of our yearly personal consumption, but for many it would mean finally being able to start building a future—contributing more to the economy.
Righting this wrong needs to end with major reform. But it can start with a small sacrifice from each of us.
Maria Luisa Palma (Red):
I promise to pay. These first words to every promissory note state the borrower’s intention as a “promise” to pay the funds borrowed. They echo in my mind every time I think about student loan forgiveness and inevitably lead me to the concept of personal responsibility.
Yes, there are many inequities in our society. Some may be correctable, while others are rooted in human nature and therefore impossible to eradicate. But do those inequities warrant voiding, on a blanket basis, legal, enforceable contracts entered into by two parties with the expectation of repayment according to the terms stated therein? In the case of federally guaranteed student loans, one party was the student borrower, the other was the U.S. Government (AKA: the public).
As a general policy, I believe our society has an interest in promoting education. We provide a free public education to any child living anywhere in the U.S., from grades K-12, generally while they are minors. Higher education, already subsidized to various degrees, is supplemented with borrowing to complete undergraduate or advanced degrees by adults. These adults make a promise to repay those debts.
Yes, these individuals may believe they have no other option available to complete their education. When student loans are presented as part of a “financial aid package”, it is easy for a student to be lulled into a sense of inevitability and complacency about the money borrowed. But this is real money changing hands, from a lender to their college, or perhaps into the student’s own hands for living expenses.
As a citizen and taxpayer, I see that as a debt owed to the public. Now one person, our President, waved a magic pen making a portion of those debts disappear. I understand that I am merely one small, lone voice, but our elected officials in the legislature had no say in this decision either. It is an inadequate “solution” with major financial repercussions that only addresses a symptom of a complex issue that has many players, and not the root cause of the problem. Now you and I are on the hook for those debts. I don’t like it.
Dave Greene (Blue):
A poor kid from the Bronx, I had no student loans when I went to Fordham University from 1966-1970 because tuition was $1,800, (~$13k now) and I received several grants to pay almost all of it.
Now students choose between private colleges with staggering debt packages, and public institutions whose funding has been slashed to the bone, causing them to raise tuition and, also pile on the loans to pay for it.
Student debt played a minor role in American life through the 1960s, then shot up repeatedly since the 1970s and 1980s. The last class who received more grants than loans was 1984.
It started in California. In 1970, Governor Reagan shut down all 28 California campuses during student protests against the Vietnam War. Reagan pushed to cut state funding for California’s public colleges but rather than reveal his ideological motivation, he said the state needed to save money. As a result, California public colleges charged residents’ tuition for the first time and that tuition “must be accompanied by adequate loans to be paid back after graduation.”
In 1968, California residents paid a $300 yearly fee-not tuition- to attend Berkeley (~$2,500 now). Presently, tuition at Berkeley is ~$15,000, with total yearly student costs reaching almost $40,000.
This action set the states for all states. Private Universities jumped on the trend.
Fordham University’s tuition is now $58,082. I would now have to pay ~$26K just for tuition. Room and board are now ~$21K, and loans are the primary way of financing tuition. My 16-year-old self and my mom could not afford to do that.
We must figure out a way to make both public and private college more affordable. To say don’t go is not the answer.
In the meantime, why should so many be saddled with loans that may take decades to pay off that their parents and grandparents never had to pay?
If governments are at least partly responsible for this huge increase in both costs and loans, shouldn’t they be at least partly responsible for helping pay those costs?
3 thoughts on “ACROSS THE DIVIDE: Perspectives on President Biden’s Student Loan Forgiveness”
The overall cost of college drives the staggering debt that is now causing such a struggle in the current generation of college graduates. A college education is not the value proposition it was when I graduated in 1980. Two issues are driving this condition. First, as noted by Dave Greene, tuition rates across the country in private and public colleges have accelerated for decades above the inflation rate. Second, the education requirements for many professions have expanded. When I graduated, a CPA only required a bachelor’s degree in most states. This has now expanded to requiring a significant number of graduate hours, if not a Master’s degree. Examples of this type of educational requirement expansion exist in engineering and medicine. Not all of these changes are driven by professional credentials, some are driven by employers as well. Education drives innovation, economic growth, and opportunity. We must find fair answers for our college graduates and address the damage to family financial situations. I’d love to charge the cost of the forgiveness back to the colleges that created the debt. That would end the recruitment cycle of students through debt financing faster than any other solution. No other business segment has continually driven up the cost of their operation, with the possible exception of hospital care, which is another debate we need to address.
These pro and con pieces appear to omit the role played by higher ed institutions themselves in the federal student loan programs that have by now become a fiscal fiasco.
Some of the contributors alluded to the very high tuition rates as a rationale for cancelling student debt. But this puts the cart before the horse, because the existence of student loans is the cause of high tuition, and loan cancellation will result in continuing tuition increases into the future unless these loan programs are significantly reformed so that institutions have some “skin in the game”.
Institutions to date have been able to increase tuition with impunity, because they know that students can always increase their borrowing to pay the higher tuition. It’s that simple. Since non-profit institutions cannot squirrel away profits, they have increased spending on additional non-academic staff (e.g., “diversity officers”) and amenities such as fancier dorms and climbing rocks as a means of attracting applicants.
This has become a vicious cycle, higher tuition leading to more student loans, leading to further tuition increases. This cycle must be stopped by reforming federal student loan programs. Until such reform, cancelling outstanding loan balances is terrible policy for everyone.
Institutions are clearly the beneficiaries of student loan programs. The losers are the students and US taxpayers. The proposed cancellation is nothing more than pandering for votes.
Student loan forgiveness is wrong for both economic and moral reasons. Some of the other essays posted here explain why that’s true and others argue why it’s false. Rather than repeat those arguments, let’s look at what can be done.
-Make schools take some responsibility: one option is to limit loans to the amount that the school is willing to give in financial aid (grats/scholarships, not loans). If the school will give you $10,000 in scholarship, you can take $10,000 in loans.
-Tie the student loan interest rate to the T-bill rate. For the average student with debt of ~$25,000, a loan paid off over 10 years with an interest rate of 3.5% requires a $247/month payment. That is not onerous.
-Eliminate the GradPlus and ParentPlus loan programs that allow graduate students/parents to borrow up to 100% of the cost of education (including living expenses). Taking on $150,000 of debt to get an MSW degree makes no sense. If you have the money and want to do it, so be it, but it shouldn’t be subsidized by others.
-Eliminate student loans, and let colleges charge what people can pay. The Harvards and Stanfords might well be able to continue to charge $75,000, but many schools will not. There are some 4500 institutions of higher education in US. That’s probably too many.
-Require schools to meet guidelines for administrative spending in order to be eligible to receive student loans. The ratio of faculty to students has remained largely unchanged for 50 years, but the ratio of administrators and support staff has exploded by more than 100%. A requirement to keep administrative spending or the number of adminstrators below a certain level would help control the cost to students
-Change K-12 education to K-13.5: Adding an optional12-18 months of vocational/paraprofessional classes to public education would give people an alternative to college.
All of these ideas have at least some merit, and all would be (politically) difficult to implement. Nonetheless, funneling ever more money to students loans leading to ever-higher college costs leading to ever more student debt leading to ever bigger write-offs at taxpayer expense is folly.