Op-Ed: The Only Fair Way to Deal with Student Debt
By Steve Levy
After hearing that President Biden was on a path toward forgiving student loans for millions of Americans, a letter writer rightfully asked, “Will I, as someone who chose not to go to college, be able to get the loan forgiven that I took out for the truck I needed to start my new business?” Therein lies the dilemma in trying to pick winners and losers on this issue.
This loan forgiveness movement is being propelled by young, upwardly mobile whites in the chic parts of our inner cities. These higher earning professionals are the ones most apt to gain by this proposal that will be subsidized by the nation’s working and middle-class taxpayers.
Beyond the blatant unfairness of forgiving loans for some and not others, there’s a bigger problem in that loan forgiveness completely glosses over the root causes of outrageous student debt that we face today.
In my book - “Solutions to America’s Problems” - I dedicate a chapter to proposing various answers for curbing ever rising college costs, which have escalated at a rate exceeding five times that of inflation
To craft a solution, we first must examine the causes of the problem, and there are a few:
First is that universities have massively raised their tuition with increased availability of federally backed student loans. When the federal government took over the student loan process a decade ago, it let the colleges off the hook, regarding bad student debt. That's not totally illogical, since we want to encourage loans even for those who are not presently in stellar financial condition. We want them to get educated to move up the social ladder. But this scenario has given colleges all the benefits, without any skin in the game.
An obvious solution would be to continue to have the feds back the student loans, but condition it upon the universities having to cap their tuition. It’s not a mandate, since universities are not required to take the feds’ backing. But if they do, they should have to abide by the prescribed prerequisites.
Another reason for the sharp increases is the dramatic bloating of college administrative costs and personnel over the last two decades. The skyrocketing spending on campus amenities to attract new students - including Glitzy new gyms, cafes, student centers, and rock climbing walls – all have to be paid for.
Yet another problem is that loans are available at the same amount, regardless of the course selection. Borrowers can take out a loan for $60,000 for a degree in Gender Studies as quickly as they can for an Engineering degree. The latter would certainly lead to a higher earning capacity upon graduation.
Some say that we should give every student the opportunity to expand his or her horizon based upon their chosen future field. Fair enough. But there’s a solution for that as well. If you select a non-marketable major and are sitting on tens of thousand dollars in loans, there could be a route towards forgiveness or loan mitigation if you agree to take a position that will benefit the taxpayers. Perhaps it might entail taking a job in a remote area where there is a severe shortage of workers in a particularly needed field.
The problem with forgiving loans as proposed by the Biden Administration is that:
1) It makes suckers out of those who have previously paid their loans.
2) It says nothing about those who will borrow in the future.
3) It forces lower-wage blue collar working class Americans to subsidize higher earning professionals.
4) It sends a bad message to our upcoming generation that there is no such thing as personal responsibility.
The latest forgiveness proposal is an obvious “vote buying” scheme to cater to the millions of Americans still paying off their loans. It is an odious policy and may, in fact, backfire politically by earning the wrath of those who have to pick up the tab.
But as noted above, there is a path by which we can be sensitive to those drowning in debt, while at the same time not being unfair to those who did not choose a path through college.
1…Require colleges that accept federal backing of the student loans to cap their tuition.
2…Lower the interest rates on the student loans. While we shouldn’t be forgiving loans, there’s no reason why the federal government should seek to be making a profit off of students trying to better themselves.
3…Place conditions on loan mitigation to the borrower by requiring some type of public service for receiving the benefit.
4…Require universities seeking federal backing of loans to tap a certain percentage of their endowments to help with tuition costs for lower and middle income applicants. Harvard’s $53.2 Billion endowment can pay the costs for all its students, for an extended period into the future.
The policy path seeking to forgive student loans is ill-advised, but the discussion will not be in vain if it leads to a collective effort to fix the root causes of student debt so we are not dealing with this issue repeatedly in the decades to come.
Steve Levy is President of Common Sense Strategies, a political consulting firm. He served as Suffolk County Executive, as a NYS Assemblyman, and host of "The Steve Levy Radio Show." He authored “Solutions to America’s Problems” and “Bias in the Media.” www.SteveLevy.info, @SteveLevyNY, firstname.lastname@example.org