Even as getting millions more Americans into college has had tremendous social value, this metastasizing debt crisis has had tremendous social costs. An entire generation has been set back: Millennials are on track to be the first generation in modern history to end up poorer than their parents. Student loans are delaying retirements. They’re suppressing the housing market. They’re suffocating new business formation. They’re even leading young people to delay getting married and having children.
They are also widening the country’s racial wealth gap. A higher share of Black college students take out loans than white students, and those loans tend to be bigger, because Black students have access to less familial wealth. The economist Thomas Shapiro notes that, two decades after they enter school, the median white borrower has paid off 94 percent of debt, whereas the median Black borrower has paid off just 5 percent. (“Are you sitting down?” he asked me, before rattling off the statistic.) Indeed, going to college now provides no boost in wealth for Black students, largely because it is so costly.
The student-loan crisis has an underappreciated emotional valence too: The debt makes people miserable. In one survey, more than half of borrowers said that they have experienced depression because of their debt. Nine in 10 reported experiencing anxiety. Even if taking on student-loan debt does tend to boost a person’s lifetime earnings, even if it is justifiable and manageable and makes sense on paper, people hate it.
It did not have to be this way, nor does it have to be this way. And although having a federal student-loan debt jubilee would not fix higher-education financing or end the COVID-19 recession, it would take a boulder off of millions of Americans’ backs—the exact number depending on how much Biden chooses to forgive and for whom.
Why not do it? Opponents make a few good arguments. First, as noted by the Harvard economist and former Obama adviser Jason Furman, the federal government would not get much bang for its buck. The Trump administration has already deferred student-loan payments through the end of the year, to give families some financial relief. Canceling payments outright would not lead to much of a boost in consumer spending. Using public dollars on another super-dole or on something like infrastructure would be a far better investment.
A second, related argument is that it is a regressive policy, which helps rich people more than poor people, much like the Trump tax cuts. Most student-loan borrowers are college graduates, and thus winners in this winner-take-all economy. A majority of student-loan debt is held by Americans toward the top of the income scale, with 56 percent held by those with graduate degrees. Doctors, dentists, lawyers, engineers, and statisticians do not need financial help from Uncle Sam right now, whereas the unemployed and minimum-wage workers really do.
Credit: Google News