"And forgive us our debts, as we also have forgiven our debtors" (Matthew 6:12)
The 1.5 trillion dollar student loan crisis is completely changing the landscape of our nation, both figuratively and literally. According to a survey in Business Insider, 13% of those with student loans have put off starting a family because of their debt burden. This rising number of young adults, delaying basic biological functions, is having a very real effect on our development as a nation. According to the Brookings Institute, population growth in the US hit an 80 year low in 2018. Moreover, because those with student loan debt have put off starting families, there has predictably become less of a need to settle down and buy a home. This issue is highlighted in a recent CNBC article. The effect of student loans on home ownership rates is made clear. When each respective generation came of age, which is to say were between the ages 25 and 34, both baby-boomers and gen-xers had 45 percent of their cohort as homeowners, while millennials trail far behind with only 37 percent. This is not to say, however, that student loan debt only affects millennials. In the aforementioned Business Insider article it is also noted that three million senior citizens are currently repaying student loans as well (so much for retiring comfortably). In other words, student loans are preventing people from both starting and finishing their working adult life on their own terms and on their own schedule, and ostensibly our “land of the free” is left eroded and worse off as a result.
Despite all of the devastation being caused by this mountain of student loan debt, there are no shortage of pundits, politicians, and trolls who continue to argue against any kind of government intervention to solve such a problem. Currently there are only two candidates in the 2020 Presidential Campaign who have a clear plan to solve this crisis. The plan is student debt forgiveness, and the candidates are Bernie Sanders and Elizabeth Warren. Moreover, because of their stance on this crucial issue, they appear to be the only viable choices for the office at this point in the race. Some will argue against student debt forgiveness, simply because these two people support it. That is, there are many people in this country who will argue against someone’s ideas just because of their political affiliation. The truth is, however, both sides of the aisle have representation in this crisis. A popular conservative voice in the financial community, Dave Ramsey, also agrees with student debt forgiveness. His only caveat is that we need to stop giving out these “stupid loans” moving forward. I agree with his point. We cannot simply forgive and forget. We must forgive the loans, learn from our mistakes, and change our path moving forward. What that means is we need to stop allowing tax free universities to gouge their students in the name of “bettering them” and prey on their futures — the same futures they are said to be providing for. No matter what side of the debate you are on, the conversation about student debt forgiveness must be had.
The following are the five most common arguments against student debt forgiveness, and why they are all wrong:
1. “Irresponsible Student”
2. “Hard-Working Taxpayer”
3. “Undermining of Financial System”
4. “Unfair to Those Who Paid Off Debt”
5. “Bailout for Rich Kids”
1. “Irresponsible Student”
The first argument is actually the first two arguments together. I say that because they are quite often combined, in order to make that which they are arguing against seem more absurd in juxtaposition to that which they are defending. It’s an ancient rhetorical trick defined in Latin as “reductio ad absurdum.” Let me explain. The first argument against student debt forgiveness is usually stated like this: Do you really think it’s fair that some irresponsible student, who went to college and ran up all this debt, now wants the hard working tax payer to foot the bill for his overpriced education?When stated like this, one would be hard pressed not to agree with the sentiment expressed here. The problem is, however, this is a much too general way to encapsulate such a nuanced issue. Let’s first start by addressing the “irresponsible student” part of the argument. Is it really irresponsible to be told your whole life that you must go to college in order to succeed; and then come of age in a shattered economy where college really did provide the only way out; and then work extremely hard to get accepted into one of our nation’s fine institutes of learning; and then work even harder to earn a degree, only to be left behind with a low paying job and a mountain of debt? Was it the hard work that was irresponsible or the wanting to better one’s self?
Most students had no idea what they were signing up for when they took out these exorbitant loans; they were just going to college like everyone always told them they had to if they wanted to succeed. Moreover, it doesn’t take too much searching on LinkedIn or Indeed to see that you do in fact need a college degree to get hired to do almost anything nowadays. It does not seem irresponsible to me to want to be employable. But I can already hear it now: they should have read the fine print; if you take out a loan you must pay it back. What about the loan provider? I ask you, in what world is it acceptable to give loans to all of these people without a consumer protection clause or any safeguards in place to save them from a predatory loan that they could never pay back. Not to mention the student loan market place is anything but a free market system. The Department of Education controls almost all of the loans in existence, both public and private. You say the student is the one who is irresponsible? What about the lender, what responsibility do they have to the public?
2. “Hard-Working Taxpayer”
Next, let me address the “hard-working taxpayer” part of the argument. The “hard working taxpayer” is the all-too-general term that is often used by political and financial snakes as a way to make lower and middle class individuals think that they are somehow going to be hurt by someone or something in the government. The GOP used this same tactic when Barack Obama was running for president in 2008 when they kept saying “he is going to raise taxes”, which was just another generality that appears to affect everyone through its lack of specificity. When in actuality, that particular instance only affected a few of the fortunate ones. That is, the truth of the matter was that then Senator Obama said he was going to raise taxes on the top 5% of income earners, which were people who made an income of over 250K a year. He very clearly outlined this on the campaign trail time and time again. But for people who weren’t paying close attention, they were easily duped into believing “the hard working tax payer” (i.e. them) was going to have to pay for all these “entitlements” of some “socialist” President. This eventually led to the tea-party movement. So you see, when it comes to the “hard working taxpayer argument,” it’s all been done before.
Unfortunately many Americans do not take the time necessary to understand all the nuances of an argument before they reach their conclusion. Let me clarify now, once and for all, who will be responsible for paying the student loan debt. In the case of Bernie Sanders’s forgiveness plan, there will be a tax, and (hear me now!) most Americans won’t pay it. It will be a micro tax on Wall Street transactions that will more than pay for the entire debt in less than 10 years. And in the case of Elizabeth Warren’s forgiveness plan, there will also be a tax, and again (listen!) most Americans will not be paying it. Warren’s tax is a 2% wealth tax on those who have a net worth of more than 50 million dollars. So I ask you now: are you a Wall Street trader or someone worth more than 50 million dollars? The odds are strongly in my favor that you are not. So don’t worry about how forgiving someone else’s student loan debt is going to somehow adversely affect you (it will actually benefit you greatly, but I will cover that later in this post). And even if you were a Wall Street trader or someone worth more than 50 million dollars, the affect that these taxes would have on your life would be marginal in comparison to the affect that these student loans have on current borrowers. It is literally world-changing. We need keep things in perspective here.
Even if you still can’t get past the idea of a tax on anyone to pay off somebody else’s debt. Keep in mind that Donald Trump’s proudest Presidential accomplishment is his two trillion dollar tax cut for the rich. How do Republicans plan on paying for this huge addition to our deficit? Hmm? I find it peculiar that they do not seem to care about our deficit when they are in office. It appears that they are only deficit hawks, when a Democrat is in charge. If you don’t like Sanders’s or Warren’s prospective forgiveness plans (which actually pay for the addition to our deficit) then we could just reverse the Trump Tax Cut (which has produced none of the benefits to the economy that Trump and the Republicans promised) and we could use that unaccounted for money to pay off the student debt. That plan seems pretty simple, and we don’t need to tax anyone to pay for it — well, not unless Trump’s plan taxes someone to pay for it. (You tell me.)
3. “Undermines the Financial System”
Speaking of undermining our financial system with errant policies, let me address the next argument against student debt forgiveness. It’s the proverbial elephant in the room of this whole conversation. The argument usually goes as follows: if you forgive all of this student loan debt, won’t you just be rewarding bad financial behavior and be sending the wrong signal to the world: rack up all the debt you want, and you never have to worry about paying it back. If the world truly took this message to heart, surely the credit system, which currently holds our economy up like a house of cards, would topple over and come crashing down. That is truly a scary proposition; well it would be, if we had not already been through this all before.
Let’s go back to 2008 and the time when our entire financial system was on the brink of collapse. The banks had got involved in buying risky assets and the housing bubble burst, sending a shock wave through the financial system, and causing money and credit to dry up. The only way to get the system working again was to prime the pump, so to speak. That is, Congress had to vote to allow the Federal Reserve and the U.S. Treasury to pump enough money into the system that the fear of credit drying up would be completely eliminated. This bailout totaled 700 billion dollars. This was the amount it took to stop the proverbial bleeding. At the time, many political pundits said that the taxpayers would suffer the consequences of such a large expenditure for decades to come. It was not the tax-payers who paid for this bailout, however, it was the students.
It is important to note that 700 billion is almost the exact same amount of money students have borrowed in the decade since 2008. So it’s like all we did is switch the debt from Fannie Mae to Sallie Mae. And that’s not where the coincidences between the mortgage crisis and the student loan crisis end. When the housing bubble burst, the mortgage default rate was 11 percent. Guess what the current student loan default rate is. That’s right. It’s 11 percent. This default rate is projected to rise to an untenable 40 percent by 2023.We need to take care of this debt problem before it’s too late and it destroys our national economy again. This is a good time to note what comedian and activist, Hassan Minhaj, said in front of Congress last month while advocating for student debt relief, “Why can’t we treat our student borrowers, the way we treat our banks?” In other words, it’s time for a bailout for students, so that we can make the economy work for us again.
4. “Unfair to Those Who Paid Off Debt”
I have answered three of the most common arguments against forgiving student debt thus far, however, there is one argument that I have had a tough time answering. The argument usually goes as follows: what about the student who took out the loan and worked hard to pay it all back. It’s not fair to them. They did the right thing, and it turns out that if they had just been irresponsible like the rest of their cohort they could have just had their debt forgiven?The interesting thing about this argument is that you almost never hear it from someone who has actually paid back his or her student loan debt. You don’t hear that argument from them for two reasons: first, because there are very few people who have actually paid back their debt in full, so there’s not too many who could claim such an offense (I am being sarcastic here of course. I know there are many who have actually paid back their debt), and second, because many of those who did pay the loan back, do not feel like it is unfair to them to forgive the debt of others. Take David Goldstein for instance, in his article for Vox, “I Paid Off All My Student Loans. I Still Support Student Loan Forgiveness,” he shares his personal journey out of debt and how it developed his current outlook on the dire economic circumstances of those in a similar situation. He struggled for years in order to get out of debt, yet nonetheless, he sees the bigger picture, and understands how forgiving student debt is good for all of us, even those with no student debt at all.
How is it good for all of us? It is very simple. No matter what industry you are in, it stands to reason that you would be much better off if the student debt money remained in the hands of the borrowers instead of going to large financial institutions. You may be saying, the financial institution took a risk and invested in the borrower, and because of that they deserve their money plus interest. That argument is completely misguided. Interest should only be earned when you take a risk. What risk did they take? Student loan debt cannot be absolved through bankruptcy; thus, the lender cannot lose. Furthermore, forgiving the debt would be good for almost everyone because it would be a 1.5 trillion dollar cash injection into the real economy. People would have more money in their pocket to spend on food, clothing, technology, furniture, cars, houses, etc. Thus, it would act as a massive economic stimulus that would benefit those working in all of the aforementioned industries, as well as many more. Moreover, this economic stimulus, serves to remedy another prevailing ill of our economic structure: income inequality. By allowing borrowers to keep more of their money, it provides those in the lower and middle classes with the raise in their income that has been a long time coming.
5. “Bailout for Rich Kids”
The talk of wages and income inequality brings me to one final argument I have heard against student debt forgiveness. I consider it sort of the honorable mention argument, in that it comes up every so often, so it must be addressed. It is such a ridiculous argument, however, that it cannot really be taken seriously. The argument is that student debt forgiveness is a bailout for rich kids. Leslie Tayne was quoted in Forbes saying, “Those who are pursuing higher paying education are already generally better off financially. Therefore, forgiving student loan debt could be considered helping an already privileged group rather than spending government funding to help those in poverty.” The evidence that Tayne or others have to back up their “rich kid” point remains to be seen. This argument against forgiveness is ludicrous just on the face of it. If the 44 million people with student loans were all rich kids then paying back the debt would not be a problem. After all, the borrowers are privileged and rich, so money must be bountiful for them. What a joke. It is by far the stupidest of all the arguments against student debt forgiveness. So like Forest Gump would say, “That’s all I have to say about that.”
Conclusion: What is Fair?
It’s not fair that so many — who tried to better themselves with education in order to become employable, achieve success, and further the businesses of others — would be punished with a mountain of debt and a complete lack of funds to pay it back. I do not think that it is unfair to allow those who have benefited tremendously from the Great Recession’s economic recovery to help those who were completely destroyed by it. It is my hope that I have made it clear who has been treated unfairly here. But to be fair (so to speak), this is not really a post about what is fair and what is not. It is really about explaining the tremendous economic and social impact student loan debt forgiveness would have on our society at-large. And why it is something we must do right away if we want to preserve the American dream and revive the opportunities for advancement that our world-leading economy used to be known for.