There's a fairer way to cancel college debt
Is it finally happening? After more than a year of equivocation and haunted by dismal polling, reports are circulating that the Biden administration is planning to cancel some of the $1.6 trillion in higher education debt collectively owed by around 45 million people.
The maximal version of the plan would be a serious mistake. As Michael Brendan Dougherty observes in National Review, the bulk of student debt is held by the relatively affluent. With already high earnings and low unemployment, it's not clear why they need the extra help. Blanket forgiveness also effectively subsidizes higher education institutions that can charge high prices with the expectations that someone else will pick up the tab. In the past, debt forgiveness has been touted as a way to jumpstart the economy. With inflation already rampant, though, the benefits of injecting more cash into the economy are dubious at best.
But canceling all the debt isn't the only option. A new report by the New York Federal Reserve finds that capping forgiveness and means-testing the benefit would provide better targeted relief at lower cost.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
According to the Fed analysis, forgiving $10,000 of debt only for borrowers who earn less than $75,000 a year would raise the share of forgiven loan dollars given to borrowers who are already delinquent in their payments, and live in low-income and minority neighborhoods. The effect of an income cap would be less dramatic but still significant if up to $50,000 of debt were forgiven. Either way, a more limited approach goes a long way to answer the criticism that forgiving student debt is a giveaway to the upper middle class and its favorite institutions.
A more constrained plan wouldn't address all the objections. For one thing, it's still expensive. According to the New York Fed, even the stingiest proposal would still cost $182 billion–more than double the annual budget for the Department of Education.
Nor do a low forgiveness cap and means-testing answer questions about why student loans should be treated differently from other forms of debt. Many truck drivers, for example, borrowed to pay for exploitative lease arrangements with their employers. By focusing on the cost of college over other financial burdens, the administration sends the message that it takes the problems of the highly educated more seriously than others'.
Finally, there's the matter of fairness. Forgiveness of outstanding loans seems to reward those who didn't make their payments at the expense of those who did. It also sets up perverse incentives by encouraging the expectation that burdensome debts will be canceled again in the future. These concerns could be met, at least partly, by attaching loan forgiveness to big changes in the way we finance higher education. In absence of such reforms, it's throwing more money into the same corrupt system.
With midterm elections impending, though, Biden and Democrats are desperate to whip up enthusiasm. Since it offers direct, individualized benefits and can theoretically be accomplished by executive action, student debt forgiveness is a tempting option. Biden's problem is that Americans with college and and especially graduate degrees are an integral portion of the Democratic coalition, but only a minority of the electorate. Means-tested forgiveness of relatively small debts could be the best way to reward supporters without provoking an even larger backlash.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
Samuel Goldman is a national correspondent at TheWeek.com. He is also an associate professor of political science at George Washington University, where he is executive director of the John L. Loeb, Jr. Institute for Religious Freedom and director of the Politics & Values Program. He received his Ph.D. from Harvard and was a postdoctoral fellow in Religion, Ethics, & Politics at Princeton University. His books include God's Country: Christian Zionism in America (University of Pennsylvania Press, 2018) and After Nationalism (University of Pennsylvania Press, 2021). In addition to academic research, Goldman's writing has appeared in The New York Times, The Wall Street Journal, and many other publications.
-
Discovering Perthshire, a Scottish wonderland
In Depth Make your own magic in this gateway to the Highlands
By Catherine Garcia, The Week US Published
-
The Forsyte Saga: 'faultless' production with a 'pitch-perfect' cast
The Week Recommends Theatrical adaptation of John Galsworthy's novels is a 'must-see' show
By The Week Published
-
US economy still strong in final preelection report
Speed Read It grew at a solid 2.8% annual rate from July through September
By Peter Weber, The Week US Published
-
US election: where things stand with one week to go
The Explainer Harris' lead in the polls has been narrowing in Trump's favour, but her campaign remains 'cautiously optimistic'
By Harriet Marsden, The Week UK Published
-
Donald Trump and the fascism debate
Talking Points Democrats sound the alarm, but Republicans say 'it's always the F-word'
By Joel Mathis, The Week US Published
-
Would Trump really use the military against Americans?
Talking Points The former president says troops could be used against 'enemy within'
By Joel Mathis, The Week US Published
-
Trump blames migrants for the housing crisis. Experts aren't so sure.
Talking Points Migrants need housing. They also build it.
By Joel Mathis, The Week US Published
-
Is Trump okay?
Today's Big Question Former president's mental fitness and alleged cognitive decline firmly back in the spotlight after 'bizarre' town hall event
By Harriet Marsden, The Week UK Published
-
The life and times of Kamala Harris
The Explainer The vice-president is narrowly leading the race to become the next US president. How did she get to where she is now?
By The Week UK Published
-
Who are undecided voters, anyway?
Talking Points They might decide the presidential election
By Joel Mathis, The Week US Published
-
What power does Elon Musk hold as a campaigner?
Talking Points The world's richest man is going all in to get Donald Trump elected in November — whether it will make a difference is entirely unclear
By Rafi Schwartz, The Week US Published