Large-scale student loan debt forgiveness is a bad idea


May 11 marked a financial turning point for my friend Laura Davenport, a teacher at Alamo Colleges in San Antonio. She received an email that day from the Department of Education saying that her student loan debt of $155,000 had been forgiven through a program called Public Service Loan Forgiveness.

She couldn’t believe it at first.

She had worked for years to qualify for such debt relief. She described to me a Kafka-esque trip with her loan officer and the Department of Education, looking for a way to repay the loans she took out for her master’s and doctorate in creative writing. From 2009, when she graduated, until now, her loan balance has gone from $119,921 to $155,399, despite making payments for more than 10 years.

I tell this story in part to draw attention to the PSLF program. People with student loans who have or will accumulate 10 years of public service or nonprofit work may be eligible for this massive debt relief. The deadline to have his loan forgiveness case reviewed by the Department of Education – with qualification standards relaxed from the past – is October.

loan debt is seen in downtown Washington, DC on May 18.”/>

A 50ft billboard urging President Joe Biden to forgive student loan debt is seen in downtown Washington, DC on May 18.

Jemal Countess, Stringer/Getty Images for Rise

I also bring this up because the Biden administration has strongly hinted that it will soon forgive $10,000 in debt — or more — under some sort of blanket amnesty program for student borrowers. A progressive movement has reached a crescendo in recent years in favor of broad student loan forgiveness.

However, I think providing this type of regular student loan forgiveness would be a big mistake.

The pro-student loan forgiveness movement makes the following points:

  • The cost of higher education has become exorbitant. Tuition inflation has averaged 6.2% over the past 20 years, far higher than inflation in the rest of the economy and certainly outpacing wage increases.
  • State universities are no longer affordable for many, if not most, Americans. Over the past 20 years, the average cost of public education has nearly tripled. Children from middle-class families cannot afford public education. Despite robust public university systems, the average student borrower in Texas has more than $31,000 in debt.
  • Unlike almost all other types of personal debt, student loans are not dischargeable in bankruptcy, making them a heavier debt burden than credit cards, home, auto, and business loans.
  • Student loan balances are larger than credit card balances, about $1.7 trillion versus $840 billion. About 13% of Americans have student loan debt, making it a widespread burden.
  • The rich countries of Europe do not make higher education unaffordable as we do. It’s usually free or very cheap there.

I agree with all of this. And yet, I still don’t think the Biden administration should offer $10,000 or more in student loan amnesty.

I have two main arguments against large-scale debt forgiveness.

First, it is unfair. Academic studies all conclude that student debt forgiveness plans are regressive, in part because of the demographics of people enrolling in higher education and in part because of the high debt balances incurred to pursue studies leading to potentially high earnings, such as medicine, law, and business. This means that the greatest benefits of this public good go to high-income populations, while low-income populations benefit less. Like regressive fiscal policy, broad debt forgiveness does not pass the smell test of fairness.

Vice President Kamala Harris, alongside Secretary of Education Miguel Cardona, speaks at the Department of Education in Washington, DC on June 2.  .

Vice President Kamala Harris, alongside Secretary of Education Miguel Cardona, speaks at the Department of Education in Washington, DC on June 2. .

Youri Gripas/Bloomberg

Second, it’s bad politics. Here is a partial list of people who have good reason not to like the widespread cancellation of higher education loans:

  • Americans without college degrees, which is a majority. Only 48% of people age 25 or older have an associate’s, bachelor’s or higher degree.
  • Americans who have received loans for higher education and who have paid their debts in one way or another. They did the hardest part, and now they will feel like suckers.
  • Americans who will take out loans for higher education in the future but will not receive loan forgiveness. When my daughters go to college, by accident of birth, they probably won’t have their debts forgiven.

It is a recipe for political resentment. Sure, we can anecdotally know or be someone who “deserves” debt forgiveness, but in terms of politics, that’s not a good idea.

So what kind of relief should we offer? I am very much in favor of debt cancellation for people who have done public service. The military, government service, and public education seem like valid ways to get debt relief. People working in these fields have earned less with their degrees than they could have earned in the private sector while contributing to society, and then society pays them back. It is a fair deal that is politically acceptable.

As for Davenport, who qualified after 10 years in public service, I’m thrilled for her. During the last administration, PSLF approvals fell to almost nothing; the Government Accountability Office found that 1% of qualified candidates by 2019.

However, a change in policy over the past year has suddenly set borrowers up for potential massive relief.

Student borrowers gather near the White House on May 12 to urge President Joe Biden to cancel student debt.

Student borrowers gather near the White House on May 12 to urge President Joe Biden to cancel student debt.

Paul Morigi, Stringer/Getty Images for We All 45 Million

A second group that should be relieved are those ripped off by higher education. On June 1, the Ministry of Education wiped out $5.8 billion owed by 560,000 people who borrowed money to attend Corinthian College, which went bankrupt after 20 years of questionable promises and underdelivery. Seems fair to me, but it would have been more satisfying if the leaders of Corinthian College had been prosecuted for costing the public billions of dollars.

The Biden administration’s plan to simply write off loan debts — unrelated to service — seems unfair and politically unwise.

Michael Taylor is a columnist for the San Antonio Express-News, author of “The Financial Rules for New College Graduates” and host of the “No Hill For A Climber” podcast.

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