Cancel debt — but only for some

I’ve always been against canceling student debt. My main argument has been that it benefits the affluent more than the poor. After accounting for the value of an education and the effects of student debt relief programs, a Brookings Institution analysis found that the wealthiest 20 percent of households owe almost a third of all student debt. The bottom 20 percent owe only 8 percent.

Anybody with a degree already owns an incredibly valuable resource — a college education. Adults with a bachelor’s degree generally earn about $1 million more over their career than people with just high school degrees.

Plus, forgiving student debt is exorbitant. As Adam Looney of the Brookings Institution has pointed out, widespread student loan forgiveness would rank among the largest transfer programs in American history. And plans to forgive all federal loans would cost more than was spent from 2000 to 2019 on unemployment insurance, the earned-income tax credit or food stamps — programs that actually go to those in need.

Debt forgiveness sends terrible cultural signals. This nation is already bitterly divided along educational lines. Today’s populists are rightly angry that collegeeducated Americans have built a society that’s pretty sweet for them and their kids, and pretty rough for everybody else. Student loan forgiveness would be seen as just another example of the educated class taking care of its own — and leaving everyone else to eat dust.

All this is still mostly true. Yet I confess I’ve been having some second thoughts.

I guess I’ve concluded that it’s wrong to generalize as if there is a single group called “college grads.” In reality, we have at least two different classes of college students and college grads. One group is secure students and grads — those who came from middle-class homes and have some resources as they go from campus into adulthood.

The other group is the precarious students and grads. Over the past few decades, America has done a much better job of getting less-affluent students through high school and into college. These folks are seizing the chance to make the big leap into the middle class, but they have few resources and no margin for error as they make that leap.

Some come to college academically unprepared. They accrue debt but can’t graduate. Others have a “life happens” moment. Maybe a parent gets sick, and

they have to quit school to support the family. Some attended subpar colleges that, they discover later, did nothing to make them more valuable in the marketplace.

These precarious students and grads are trying to make the leap at a historically difficult moment. The financial crisis and COVID pummeled young adult career trajectories. Education and real estate prices have soared. By the time the boomers hit a median age of 35, their generation owned 22% of the nation’s wealth. Millennials — who will hit a median age of 35 in 2023 — own about 6% of the nation’s wealth.

These precarious students and grads did what we wanted them to do — leap for social mobility. But many now owe more than they have in wealth. Laura Beamer and Eduard Nilaj of the Jain Family Institute found that in 2019, student debtto-income ratios were at 98 percent for the lowest income decile of America. This means that the median income for this group exceeded the median student debt burden by less than $700.

Conditions are especially dire for African Americans. According to a 2016 Brookings report, the average Black graduate owes $52,726 four years after graduation, compared with $28,006 for the average white graduate. Black borrowers are also much more likely to be behind on their payments.

For many of these young adults, the debt burden changes their psychology and behavior. Many suffer from the severe anxiety of feeling buried under a relentless weight. It has been difficult for them to move to opportunity, buy a home, start a business, have a kid — all the things we want young adults to be doing to ensure a dynamic and prosperous America.

I admire the way Elizabeth Warren has pushed this issue so passionately, but I’m still far away from her proposal, which would spray benefits to a lot of people who don’t need them. And if you ask me whether we should have a big student debt cancellation program, I’ll say no.

But if you ask me to say where America’s social mobility machine has broken down, I will include the way under-resourced young adults are falling off track between the ages of 20 and 35. Are there better ways to help those Americans than debt cancellation? You betcha. Do we live in a country where legislation to do that will pass Congress? We do not.

Debt cancellation is something President Joe Biden can probably do on his own. So I’m rooting for tightly focused forgiveness. I’m hoping Biden will significantly raise the amount of debt he’s willing to forgive, to say $20,000. But I’m hoping he’ll limit the forgiveness to precarity grads — perhaps to those from families making less than $75,000, perhaps to those who already received Pell grants.

Social change over the past few decades has made me much more supportive of income redistribution than I used to be — especially redistribution that invests in human capital. But it’s got to be distribution downward, not upward.