Student loan debt

Con 1: Debt forgiveness is an abuse of the loan system and an affront to borrowers who paid off their debt; people must be held responsible for their economic choices.

Matthew Noyes, a columnist at Lone Conservative, noted the sacrifices he made to pay off his $27,000 in student loans. As he explained, “Taking out a loan is a choice, and personal responsibility shouldn’t be supplanted by taxpayer bailouts. ‘Canceling’ student loans means penalizing people like me for honoring my word and repaying the debt I chose to accept.” Noyes stated that the forgiveness debate is steeped in the idea that,

people are entitled to a college education and other peoples’ hard work. It codifies in policy the idea that adults are not responsible for their own actions (i.e., taking on debt). In a free society, I am not entitled to a college education and neither is anyone else.[27]

Furthermore, fewer than 20 percent of American adults have student loan debt. Is it fair to offer relief to people who overstretched their financial capabilities to go to college and not to those without student loan debt who may still be struggling financially? [28]

Con 2: Debt forgiveness would disproportionately help rich or more financially secure college graduates.

As Constantine Yannelis, professor of finance at the University of Chicago, found,

Any policy that is a universal loan forgiveness policy or a capped forgiveness policy—say forgiving debt up to $50,000—is going to give most of the dollars in forgiveness to upper-income individuals.…Basically, most of the benefits will end up accruing to upper-income individuals. [29]

As journalist Emma Ayers added,

Students from families earning more than $114,000 a year borrow at the same rate as the lowest-income students—and they take out loans nearly twice as large. People with advanced degrees—lawyers, doctors and others—account for 40 percent of all student debt [according to estimates by American Progress]. And the top 25 percent of income-earning households hold almost half of student loan debt.…Student forgiveness would largely be a hand up to the better off.[30]

Moreover, as Adam Looney, nonresident senior fellow at the Brookings Institute, pointed out, student loan forgiveness benefits only people who went to college:

More than 90 percent of children from the highest-income families have attended college by age 22 versus 35 percent from the lowest-income families. Workers with bachelor’s degrees earn about $500,000 more over the course of their careers than individuals with high school diplomas That’s why about 34 percent of all student debt is owed by borrowers in the top quartile of the income distribution and only 12 percent owed by the bottom 25 percent. Indeed, the majority of all student debt is owed by borrowers with graduate degrees.[31]

People who borrowed for master’s degrees and PhDs hold 56 percent of student loan debt, according to Brookings Institute estimates. Holding a masters or doctorate degree is also correlated to higher incomes. People with master’s degrees earn about $2.7 million over a lifetime, more than twice what those with high school diplomas earn ($1.3 million). Ph.D. holders earn $3.3 million more over a lifetime. [32] [33]

Inez Stepman, senior policy analyst at Independent Women’s Forum for Prager University, argued, “The people who staff government bureaucracies, corporate HR departments, and school administrations—the people chiefly responsible for the woke mini-revolutions upending institution after institution [will benefit]. For this managerial class, student loan forgiveness would be great,” but the $300 billion to $1.9 trillion tax burden would be shouldered largely by the working class that didn’t attend college. [45]

Con 3: Discharging student loan debt would only be a temporary bandage on the much larger problem of inflated college costs.

The U.S. already has several student loan forgiveness programs, and yet Americans are still in a student loan debt crisis.

People who work in public service jobs can have their loans forgiven after 120 loan payments. Some teachers can have up to $17,500 forgiven after five years of teaching. Nurses can have up to 60 percent of nursing education loans forgiven, followed by another 25 percent. [8]

Income-driven repayment (IDR) plans are available that allow loans to be forgiven after 20–25 years of income-based payments. Military members can have up to 100 percent of their loans forgiven. Medical doctors and lawyers have multiple options for forgiveness. AmeriCorps service members can have 100 percent of their loans forgiven. [8]

As Betsy Mayotte, president and founder of the Institute of Student Loan Advisors, noted,

To me the free or debt-free college proposals hold more weight [than loan forgiveness], as they address the illness itself rather than just the symptoms. Don’t get me wrong—if we could find a way to do both, we should—but reducing the debt consumers have to take out in the first place would be the thing that would have the longer-lasting benefit to the economy.[15]

The U.S. needs a solution to outsized college costs that cause students to take out loans in the first place, rather than a temporary solution that does nothing to prevent the next generation from accruing similar debt.

Con 4: Discharging student loan debt via bankruptcy would allow borrowers to abuse the loan system and encourage colleges to increase tuition.

Making it easier to discharge loans would give people an incentive to take out loans with no intention of paying them back, or to borrow more than they need. That in turn could cause them to seek bankruptcy without fully realizing the negative long-term consequences on their credit scores and other aspects of their lives. [34] [35] [36]

New college graduates rarely have significant assets to surrender in bankruptcy, so they have less incentive to avoid bankruptcy. [37]

Student debt elimination through bankruptcy would encourage increased borrowing, and more borrowing leads to higher tuition. Abigail Hall Blanco, assistant professor of economics at the University of Tampa, said,

Loan forgiveness would be one giant subsidy, creating perverse incentives for both schools and students. If schools knew the government would forgive the cost of their students’ education, they’d face no incentive to cut costs to keep tuition down.[38] [39]