So tonight I log on for the first time in god knows how long and I see an draft of a post I started to write in 2020. I haven’t touched it since – still just a brain dump and excerpts of pieces other people wrote – but interesting that I still see things pretty much the same way as I did then. Anyhow, here’s the unedited draft –
A few questions to frame the discussion of student debt forgiveness:
- Why privilege forgiveness of student debt over forgiveness of other types of debt, e.g., medical debt?
- What’s the root cause of the student debt crisis? What, if anything, will debt forgiveness do to address the root cause?
- What broader social goods will be achieved by forgiving student debt?
I remain lukewarm about straight-up debt forgiveness because I don’t have satisfying answers to those questions and I haven’t heard any from anyone else.
I think Dems are wildly underestimating the intensity of anger college loan cancelation is going to provoke. Those with college debt will be thrilled, of course. But lots and lots of people who didn’t go to college or who worked to pay off their debts? Gonna be bad.
AOC:
“Things were bad for me, so they should stay bad for everyone else” is not a good argument against debt cancellation – student, medical, or otherwise.
I have mixed feelings about debt forgiveness. Zero interest? Yes. Forgive principal?… Maybe. One thing I’m stuck on is that debt forgiveness doesn’t fix the problem which led to the debt. Debt forgiveness alone treats the symptom but not the cause. To address the cause we need to reinvest in public colleges and universities AND people have to say “No.” to $50k/year tuition. So long it’s possible for people to borrow to pay ridiculously high tuition the problem will persist. To me, there’s an opportunity cost consideration. If we’re going to spend $X billion towards fixing a problem then we need to fix it. If spending $X billion forgiving student debt doesn’t fix the root cause then I start to think “What other problems could we solve for $X billion ?” Pay off everyone’s medical debt? Enact single-payer healthcare? Rebuild and de-carbonize our energy infrastructure? Decent public transportation? Student debt forgiveness appeals to me if it’s part of a bigger plan to invest in public goods. It’s less appealing as a one-off action.
I think the argument will be along the lines of “Those people shouldn’t have taken on that debt if they didn’t know they could pay it off.” No benefit to people who didn’t got to college or paid their debt off will offend many people’s sense of fairness. That doesn’t mean don’t do it. (The economics of it make good sense.) But be prepared for pretty intense blowback. There’s a political downside as well as an upside. Forgiving $50k in student debt will prompt questions like “Why not forgive $50k of my mortgage?” “Why not forgive $50k of my medical debt?” “Why don’t I get $20k to cover the cost of the car I need to get to work?” If student debt forgiveness is presented as one element of a grand plan then I bet it will go over better than if it’s presented as a one-off. If it’s one element of a really big debt relief package as well as part of a bigger effort to drive down the cost of education then I bet it’ll get a better reception.
Debt foregiveness treats the symptom not the cause.
I’m on the fence re debt forgiveness. The argument for: It’ll improve many people’s quality of life. The arguments against: Simply forgiving loans treats the symptom but not the root cause. The existing system is pathological: tuition and fees at private institutions, as well as many public ones, are outrageous and lenders make it too easy to pay. Simply forgiving debt leaves the current system in place. Unless we change it we’ll be right back here again in a few years. What do we do then? Spend another $1Trillion in the interest of “harm reduction”? Personal accountability is also an issue. People need to be able to say, “No, taking out $50k a year in loans without a clear path to paying them back could destroy me. I’m not going to do it. I’m going to go to Local State College for $20k/year instead.” (That’s still a crazy amount of money but it’s a lot less crazy than $50k/year.) Related, lenders make to it too easy for people to take out loans they can’t repay. That needs to end. Reinvest in public colleges and universities? Absolutely. That should be our top priority. Forgive interest on student loan debt? Yes. Forgive loan principal? I’m not convinced. The whole system is busted. If we’re going to spend $1Trillion then let’s put it towards fixing the problem rather than just treating the symptom and turning a blind eye to the problems which go us into this crisis.
Damon Linker, The class folly of canceling student loans
The easy availability of federal grants and loans for college have allowed universities to increase prices far in excess of the inflation rate for decades — because the schools have known that money would be available to pay the bills. With that arrangement in place, the only thing putting downward pressure on those constantly rising prices has been hesitation on the part of young people to take on responsibility for the debts. But once the federal government starts canceling those debts, that concern will vanish, inflating prices further — especially since everyone will know perfectly well than it will be politically impossible for the act of debt forgiveness to be a one-time event. Once one generation of college graduates has been liberated from its debt burdens, every subsequent generation will appeal to the principle of fairness in demanding the same.
Before long, we will live in a country in which the federal government in effect provides free college for anyone who wants it — not just at community colleges and state schools, but at the most expensive private colleges as well. Some might think that sounds like a dream, but they should think again — because as soon as Washington is on the hook for the bill, constituents will demand cost-cutting. And that will almost certainly mean price controls — along with a much greater government involvement in what colleges teach and what professors are permitted to say in the classroom and in their writing and research.
[…]
The country’s two major parties are locked in a multi-decade-long battle to determine which of them will come to be seen as the greater champion of the American worker. Spending tens of billions of dollars canceling college debts would be a major act of surrender in that fight. Which is why politically savvy Democrats should prefer that the new president pursue a broad-based stimulus package, infrastructure spending, expansion of the Affordable Care Act, or just about any other policy over the cancelation of college debt.
Matt Bruenig, What Is the Current Student Debt Situation?
Cathy O’Neil, Let’s make paying for college harder
Whenever we make college more affordable by helping people pay for college, it just makes college more expensive. Tuition rises to meet our new-found ability to pay…
The result of our federal loan programs, which were started with good intentions, is that whereas before college was out of reach for lots of people, now it’s still out of reach, they go anyway, and then emerge loaded with debt. It’s not actually a huge improvement for the vast majority of the middle class, but it’s become a requirement to get a reasonable job so people are forced to go through it, kind of like a hazing ritual.
There’s another related reason why college tuition goes up, namely because we have stopped funding state schools, so their tuition is higher, and the other colleges also rise to meet them. But part of the reasoning behind that is because we have all these federal loans available, so why would we need to fund the state schools.
We need to put into place ways for tuition to go down. First, we make paying for college harder, and that includes for upper middle class folks. The reasoning is this: if you’re the only person having trouble paying for something, that’s bad. But if everyone has trouble paying for something, the price goes down.
Second, we make state schools much cheaper, or even free, by funding them.
Mike Konczal, The UNC Coup and the Second Limit of Economic Liberalism
Nov. 13, 2014
There was a quiet revolution in the University of North Carolina higher education system in August, one that shows an important limit of current liberal thought. In the aftermath of the 2014 election, there’s been a significant amount of discussion over whether liberals have an economic agenda designed for the working and middle classes. This discussion has primarily been about wages in the middle of the income distribution, which are the first major limit of liberal thought; however, it is also tied to a second limit, which is the way that liberals want to provide public goods and services.
So what happened? The UNC System Board of Governors voted unanimously to cap the amount of tuition that may be used for financial aid for need-based students at no more than 15 percent. With tuition going up rapidly at public universities as the result of public disinvestment, administrators have recently begun using general tuition to supplement their ability to provide aid. This cross-subsidization has been heralded as a solution to the problem of high college costs. Sticker price is high, but the net price for poorer students will be low.
This system works as long as there is sufficient middle-class buy-in, but it’s now capped at UNC. As a board member told the local press, the burden of providing need-based aid “has become unfairly apportioned to working North Carolinians,” and this new policy helps prevent that. Iowa implemented a similar approach back in 2013. And as Kevin Kiley has reported for IHE, similar proposals have been floated in Arizona and Virginia. This trend is likely to gain strength as states continue to disinvest.
The problem for liberals isn’t just that there’s no way for them to win this argument with middle-class wages stagnating, though that is a problem. The far bigger issue for liberals is that this is a false choice, a real class antagonism that has been created entirely by the process of state disinvestment, privatization, cost-shifting of tuitions away from general revenues to individuals, and the subsequent explosion in student debt. As long as liberals continue to play this game, they’ll be undermining their chances.
First Limit: Middle-Class Wages
There’s been a wave of commentary about how the Democrats don’t have a middle-class wage agenda. David Leonhardt wrote the core essay, “The Great Wage Slowdown, Looming Over Politics,” with its opening line: “How does the Democratic Party plan to lift stagnant middle-class incomes?” Josh Marshall made the same argument as well. The Democrats have many smart ideas on the essential agenda of reducing poverty, most of which derive from pegging the low-end wage at a higher level and then adding cash or cash-like transfers to fill in the rest. But what about the middle class?
One obvious answer is “full employment.” Running the economy at full steam is the most straightforward way of boosting overall wages and perhaps reversing the growth in the capital-share of income. However, that approach hasn’t been adopted by the President, strategically or even rhetorically. Part of it might be that if the economy is terrible because of vague forces, technological changes and necessary pain following a financial crisis, then the Democrats can’t really be blamed for stagnation. That strategy will not work out for them.
The Democrats (and even many liberals in general) also haven’t developed a story about why inequality matters so much for the middle class. There are such stories, of course: the collapse of high progressive taxation creates incentives to rent seek, financialization makes the economy focused less on innovation and more on disgorging the cash, and new platform monopolies are deploying forms of market power that are increasingly worrisome.
Second Limit: Public Provisioning
A similar dynamic is in play with social goods. The liberal strategy is increasingly to leave the provisioning of social goods to the market, while providing coupons for the poorest to afford those goods. By definition, means-testing this way puts high implicit taxes on poorer people in a way that decommodification does not. But beyond that simple point, this leaves middle-class people in a bind, as the ability of the state to provide access and contain costs efficiently through its scale doesn’t benefit them, and stagnating incomes put even more pressure on them.
As noted, antagonisms between the middle class and the poor in higher education are entirely a function of public disinvestment. The moment higher education is designed to put massive costs onto individual students, suddenly individuals are forced to look out only for themselves. If college tuition was largely free, paid for by all people and income sources, then there’d be no need for a working-class or middle-class student to view poorer student as a direct threat to their economic stability. And there’s no better way to prematurely destroy a broader liberal agenda by designing a system that creates these conflicts.
These worries are real. The incomes of recent graduates are stagnating as well. The average length of time people are taking to pay off their student loans is up 80 percent, to over 13 years. Meanwhile, as Janet Yellen recently showed in the graphic below, student debt is rising as a percentage of income for everyone below the bottom 5 percent. It’s not surprising that studies find student debt impacting family formation and small business creation, and that people are increasingly looking out for just themselves.
You could imagine committing to lowering costs broadly across the system, say through the proposal by Sara Goldrick-Rab and Nancy Kendall to make the first two years free. But Democrats aren’t doing this. Instead, President Obama’s solution is to try and make students better consumers on the front-end with more disclosures and outcome surveys for schools, and to make the lowest-income graduates better debtors on the back-end with caps on how burdensome student debt can be. These solutions by the President are not designed to contain the costs of higher education in a substantial way and, crucially, they don’t increase the public buy-in and interest in public higher education.
The Relevance for the ACA
I brought up higher education because I think it’s relevant, but I think it also can help explain the lack of political payout for the Affordable Care Act. It’s here! The ACA is not only meeting expectations, it’s even exceeding them in major ways. Yet it still remains unpopular, even as millions of people are using the exchanges. There is no political payout for the Democrats.
Liberals chalk this up to the right-wing noise machine, and no doubt that hurts. But part of the problem is that middle-class individuals still end up facing an individual product they are purchasing in a market, except without any subsidies. Though the insurance is better regulated, serious cost controls so far have not been part of the discussion. Polling shows half of the users of the exchange are unsure if they can make their payments and are worried about being able to afford getting sick. This, in turn, blocks the formation of a broad-based coalition capable of defending, sustaining, and expanding the ACA in the same way those have formed for Social Security and Medicare.
Any serious populist agenda will have to have a broader agenda for wages, with full employment as the central idea. But it will also need to include social programs that are broader based and focused on cost controls; here, luckily, the public option is a perfect organizing metaphor.