If we see a Beverly Hills plastic surgeon getting into his new 2023 Porsche Carrera with the license plate DEBT4GIVN, we will see the full folly of forgiving all student debt.
A full forgiveness of all existing federal student debt would result in 46 million of America’s college elite sharing a windfall of $1.7 trillion while leaving at least 250 million Americans scratching their heads. If this is a political calculation, it’s inexplicable.
If the goal and objective is to create some form of equity among those who have unpaid student debt, a blunderbuss approach is the worst possible alternative. Forgiving the debt of anyone who has the capacity to repay their debt is nothing less than the gift of public funds. (A neurosurgeon with student debt of $10,000 or $50,000 or $150,000 is not a compelling beneficiary. A schoolteacher in an economically disadvantaged community may be a compelling beneficiary.) But, forgiving the total debt of anyone who has the capacity to repay a portion of their student debt is still a gift of public funds.
There’s no underlying intellectually defendable policy that would have the government forgive $1.7 trillion of existing student debt while simultaneously continuing to make billions of dollars in new student loans. It’s the equivalent of paying off the gambling debts for one generation while inviting the next generation for a weekend in Las Vegas.
If the president would determine to forgive student debt, the list of aggrieved individuals would be very, very lengthy: anyone who has paid off their student debts, anyone who has paid off the student debts of their children, any children for whom the student debt was paid, anyone who worked their way through college, anyone who had their education paid for by parents who reduced their lifestyles for 30 years to be able to send their children to college, anyone who joined the military to ultimately receive a free college education, anyone who went to community college before attending a four-year school to lessen the cost of college, and anyone who dropped out because the cost of college was too high.
Perhaps the angriest set of voters would be the parents of children and those young adults themselves who will soon be entering college. How could the president eliminate the college debts for students who graduated in 2022 and ignore the students who will begin college in the fall of 2022?
The entire concept of eliminating student debt without having a plan for future generations is little more than a solution in search of a defendable theory. Or, it’s no more than a blatant attempt to buy votes. In 2022, voters are significantly more sophisticated than in 1828 when the supporters of Andrew Jackson provided a drink for anyone who voted for Jackson. Any non-transparent attempt to buy votes in 2022 by eliminating student debt would likely be met solely with cynicism and contempt.
What could make college debt more important than the general debt of everyone else? There’s no compelling argument that the economic health of college graduates trumps the economic health of everyone or anyone else. How is college debt different from automobile debt for an automobile that’s used to drive to work every day?
In 1993, Congress took over student debt with the promise that it would save the nation $61 billion over the first decade. Now, three decades later, that plan could result in the forgiveness of $1.7 trillion in debt to us, the citizens of the United States. Note, both President Joe Biden and Sen. Chuck Schumer were in Congress in 1993 when Congress promised that taking charge of student debt would help pay for Obamacare.
The forgiveness of $1.7 trillion of student debt would have other consequences that would impact all Americans.
At a moment in time when the United States is experiencing the ravages of severe inflation for the first time in decades, the funds not being paid to the government on existing student debt would quickly find their way into the marketplace. This would put more dollars into place chasing the same supply of goods and services. This is a classic example of an inflation accelerator. Simultaneously, that amount causing additional inflation would be matched by the increase in the deficit, which has already grown to unsustainable levels.
One promise the government has not made with respect to a forgiveness of student loan debt is the reduction in federal employees because of the elimination of all the activity necessary to manage existing student loan debt. While the offset of fewer employees would be a tiny, tiny offset to forgiving $1.7 trillion of debt, it would at least demonstrate a bit of running the government for the benefit of the taxpayers.
Nothing in the policy aspects of student debt forgiveness addresses the underlying issues of college debt. What are the underlying advantages or disadvantages of attending an expensive university and receiving a degree not rewarded with economic equivalency? There’s no study being used to promote the forgiveness of student debt that considers how a debt-financed college education impacts a student who graduates with a degree for which the “real world” doesn’t see any value that’s reflected in that student’s weekly paycheck. Nothing in the policy addresses the equivalencies in the cost of one degree at one university versus the cost of the same degree at another university. If student debt is to be forgiven, does society have to pay for the most expensive educational opportunities?
Forgiving student debt might or might not provide strong support among voters that would have their personal student debt forgiven. For those voters without student debt, it would be seen as a gift of public funds to a very vocal few. Forgiving student debt while simultaneously providing new student loans demonstrates an absence of any meaningful or serious public policy solutions.
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