Throughout the Democratic presidential primary process, candidate after candidate has promised voters the moon. Long on aspirations — and short on details of how to pay for them — the debates so far are a contest of who could out-promise whom.
All the high-profile proposals, especially Medicare for All and the Green New Deal, would be expensive. But none of them would have the social costs — for generations — of forgiving all student loan debt.
That notion, so famously championed by Sen. Bernie Sanders (I-Vt.) since his quixotic presidential bid in 2016, seems to have become almost universally held by the Democratic field. Sanders’ proposal would eliminate the student loan debt for all 45 million borrowers, at an estimated cost to the taxpayers of $2.2 billion; this proposal “out-bids” Sen. Elizabeth Warren’s plan, which would grant relief to “only” 75 percent of borrowers.
But to be fair, liberal politicians are not alone in championing the idea. Some influential voices on the Right have advocated for forgiveness as well. For example, Claremont Institute’s Matthew Peterson recently suggested that President Donald Trump “needs to propose a one time student loan forgiveness program in exchange for shutting down [the] entire federal educational loan program.”
How would we pay for such a giveaway? It’s as simple as assessing a new sales tax, as another conservative scholar proposes.
But these “conservative” proposals are as much fantasyland thinking as the rhetoric from the Democratic candidates.
The fool’s errand of proposing a new tax aside, forgiving student loans would be political suicide for conservative policymakers. That is especially true for President Trump. The reason? A disproportionate share of student debt is held by those with advanced degrees (48 percent of all debt) and the highest incomes — more than a third of all student debt is held by borrowers who earn $97,000 or more. The president’s base supporters, in particular, would see forgiveness for what it is: a giant giveaway for elites, so many of whom have weaponized their activism majors and identity-group degrees to undermine America.
It’s not hard to envision the furor that would ensue among those earnest souls who’ve diligently paid off their debts, which most borrowers continue to do, in spite of upward trends in default rates. Policymakers ought to remember that only 17 percent of American adults hold student debt.
Asking the right question
This whole debate has suffered from asking the wrong question. The question isn’t how much student loan debt we can forgive; it’s how we got here in the first place.
The answer is clear: Government. Since the expansion of student loan programs beyond their original intent of creating access for low-income students, government has done what government always does: built a near-monopoly for itself, effectively eliminating private lending. The result has been skyrocketing tuition rates, fueled by administrative bloat and obnoxious construction projects. Twenty-first century higher education spending has little to do with the instruction of students.
Solving this problem, like any government-induced mess, will take time and determination. As John Cogan reminds us in his magnificent The High Cost of Good Intentions, “the creation of entitlements brings forth relentless forces that cause them to inexorably expand.”
Exemplifying the Problem
Relentless have been the negative consequences of the federal government’s over-involvement in student loans. Consider, for example, the abysmal track record of the college that hosted the most recent Democratic debate, Texas Southern University in Houston. As the Department of Education’s College Scorecard data shows, for a tuition of $20,000 per year, only 20 percent of students will graduate within six years, accruing an average student loan indebtedness of almost $30,000. And only 27 percent of the school’s student borrowers pay at least one dollar of their student loans within three years of leaving school — one of the worst records in the country.
Texas Southern is not alone, unfortunately, in serving as an example of the absurdity of the system. Consider Thomas Cooley Law School in Michigan, where students have paid tuition that is equivalent to that of the most competitive law schools in the country. The return on investment is abysmal, with only 25 percent of its graduates working in the legal field one year after graduation — and 50 percent unemployed altogether. But our current student loan system so imperfectly aligns investment with outcomes that the federal government does not distinguish loan risk between Cooley Law and law schools with far better employment records.
It gets worse. The case of the Charlotte School of Law is particularly egregious, causing the U.S. Department of Education to deploy an under-utilized step — delisting the school from approved recipients of student loans. That was fatal for the college, which received 90 percent of its revenue from federal student loan programs; students have since sued the now-closed school for fraud.
The Department of Education needs to take stronger action against colleges perpetrating educational fraud. That step, in turn, should be followed by further bold action — the decoupling of federal student loans with colleges and academic programs with poor outcomes. Too many Americans — in our contemporary, irrational belief that everyone must earn a four-year degree — have been duped into believing that every college in America is worth the investment. The federal student loan system has guaranteed that the opposite is true.
These alternatives to loan forgiveness, along with an expanded program of income contingent repayment, are possible right now, administratively, without congressional action. Longer-term solutions involving congressional action should include the ability to discharge student loan debt in bankruptcy, and requiring universities — many with obscene and under-used endowments — to share the burden of their graduates’ loans whenever they default. Ultimately, Congress ought to get the government out of the business of lending altogether, leaving the federal government to do what government often does well: accruing data on outcomes and trends, making them transparent and easily available to the consumer, thereby allowing the students and the market to make higher education great again.
President Trump would be especially effective in this message, because at its core, it’s a critique of the elite of elites — college administrations and liberal academics. This would be a Trumpian message at its finest, placing the onus on the tiny group of university bureaucrats who have weaponized the federal student loan system against students themselves, whether financially or in promoting the vacuous programs and identity politics that undermine the very ideals of America.
We can seize the moral high ground from the panderers on the Left on this issue.