Student debt: The steep cost of forgiveness

President Biden “was never a big fan of using the presidency to cancel debt,” said Christian Paz in Vox, but facing plummeting approval ratings from young people, he seems poised to change his mind. Aides have indicated he’s likely to soon announce an executive order canceling up to $10,000 in debt, with an annual income cap of about $125,000. Despite those limitations, the plan would cost about $373 billion—about the same as the cost of welfare for poor families over the past two decades—while erasing less than a third of the $1.7 trillion owed by more than 40 million Americans. It also would almost certainly face opposition from Republicans, who reject “any amount of forgiveness.”

“This isn’t just bad policy, it’s bad politics,” said Rory Cooper in The Daily Beast. Wiping college debt off the books gives expensive schools no incentive to lower costs and encourages more young people just entering college to take out loans they can’t afford to pay back to pursue degrees with poor earning potential, in the hope they “will benefit from a bailout in the future.” Democrats already have a 12-point advantage with college-educated voters, and “asking truck drivers to pay off the loans of college graduates” will only further alienate the working-class Americans who are already fleeing the party. “There is no social justice reason” for wiping out student debt, since most of it is owed by people earning more than $75,000 a year, said Megan McArdle in The Washington Post. “There is only political pandering” of dubious value to Democrats.

I largely agree, but I’d make an exception, said David Brooks in The New York Times. Some of the debtors are ambitious young people from poor or lower-middle-class homes who’d been bombarded with the message that college was their only ticket to success. Too many wound up in jobs with modest incomes and are saddled with more debt than they can possibly afford to repay, leaving them unable to buy homes, have kids, or move to better job markets. Before debt is relieved, said Peter Coy, also in the Times, we should address the problem of “unproductive education.” Many loan-supported tuition dollars have flowed to slickly marketed for-profit schools and degree factories that leave students without employable knowledge or skills. If the government forgives debt without cracking down on colleges offering near-worthless degrees, “it will just keep the vicious cycle going.”