Why canceling everyone’s college debt is a bad idea

December 10, 2020

Student loan debt is the worst, right?

A Biden administration will no doubt be pressured to pursue policies to cancel student loan debt on a broad scale.

To those who have recently taken out student loan debt (or are currently doing so), this policy may sound like an especially good idea. Even to those who don’t have debt, but still hold progressive ideas, this policy is part of the push to make education more equitable and fairer.

But the fact is, it comes with serious pitfalls.

In his recent article titled “The oddest sort of progressivism,” Rick Hess from the American Enterprise Institute explains why canceling student loan debt is such a bad idea 

Here are three key pitfalls pointed out in his article.

1. While some argue that student loan forgiveness would benefit the economy, that is not likely to be true and makes assumptions about how Americans would respond financially.

[F]orgiveness is a lousy way to stimulate the economy. Wiping away hundreds of billions in debt that isn’t due for many years will do little to impact short-term household finances or spur much spending today. For the millions struggling through a pandemic to keep a roof over their head and their bills up to date, student loan forgiveness is a scattershot and ineffectual way to provide relief.

2. While the policy of canceling student loan debt is championed as a way to help those most in need, like the poor and marginalized, it’s most likely to benefit those who are college-educated professionals in lucrative careers. When it comes to forgiving college debt, Hess states:

[S]uch a move would disproportionately benefit affluent families, since working class and low-income households are much less likely to have attended college at all, or to have borrowed heavily to attend pricey schools.

3. While the economics of student loan forgiveness are problematic, so too is the larger message it sends to younger generations, one that is contrary to the principles of American prosperity.

Now, while criticisms of the logic and design of the student debt forgiveness are all appropriate, they really don’t get at the heart of what makes this proposal so troubling: That it represents a casual assault on the foundational virtues that sustain American prosperity and comity. The compact that undergirds any form of lending—but especially public lending—presumes that borrowers are taking responsibility for their choices.

You can read the full article here.

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