I am one of the chumps who repaid my student loans.
When I finished graduate school almost 10 years ago, I had more than $100,000 in debt. It was daunting, but I knew going in that I would have to live frugally to pay them off. I delayed fully funding my retirement plan; I took budget vacations (and took those sparingly); I used all the cash I had left to buy a house in a more affordable neighborhood than where my coworkers lived. Over time, I consolidated and refinanced my student loans, lowering my interest rate and extending the term in order to lower the mandatory payments, even as I paid as much as I could each month.
These modest sacrifices allowed me to pay off my student loans in full three years ago, or about five years before they matured. I was proud to have paid it off.
Upon hearing of Joe Biden’s plan to “forgive” what is thought to total more than half a trillion dollars of federal student loans, I was mad. I would have qualified for $10,000 in forgiveness. Why did I cut corners in my personal life unnecessarily? With an extra $10,000 I could’ve taken my wife on better vacations or bought a nicer house. If I had invested it when I finished school, I would be a lot more than $10,000 richer today. Why did other people get this, but I didn’t?
In the aftermath of the announcement, demagogues on the right have cast the beneficiaries of Biden’s largesse as “lazy” and “deadbeats”, and talk of “moral hazard” as they fundraise on their impotent opposition. Many leftists respond with “why can’t you just be happy that these kids now have less debt?” These arguments are childish and sidestep the real issue.
I am not mad at the students. If the government mails you a check, keep the money. I would have. College is expensive, but many good, high-paying jobs require degrees. Despite the high and rising cost, it is still rational to attain certain degrees from certain colleges. Before signing for my student loans, I did my research. Graduates holding my desired degree from my chosen school earned enough money to justify the cost. And I have gone on to achieve those earnings, so the point I keep coming back to as I think about this is: I don’t need the money.
Most of the students do not "need" the money. The statistics show that people with a college degree, or even those who took courses but did not complete a degree, earn significantly higher salaries and are more upwardly mobile over their careers than those with less education. Penn Wharton estimates that only 14% of the debt forgiven was held by people in the bottom income quintile, the cutoff for which is more than double what the government defines as the poverty level for a single person household. Of course there are extreme examples of people with six-digit debt working as a barista. But even in those rare cases, does this really help them? The problem is not lazy kids, it’s the fact that the government provides a blank check to schools with absolutely no plan to hold them accountable for the value of the education they provide. Many colleges do not publish, or even possess, the information I utilized when choosing my graduate school.
This is the fatal flaw in Biden’s plan and in the leftist arguments for it. This write-off gives schools unfettered license to further raise their costs. Every government program that provides funding with limited or no oversight results in significantly higher costs. Just this month, before the ink on the Inflation Reduction Act and its $7,500 electric vehicle subsidy was dry, car manufacturers raised prices on their EVs by roughly $7,500. The nonpartisan Committee for a Responsible Federal Budget has projected that total student debt will surpass pre-forgiveness levels in just five years. Colleges have just received an implicit federal backstop without being held to account for their role in creating student debt. Moral hazard? Here’s looking at you, Federal government.
Now the unchecked tuition increases will continue. As I fund 529 plans for my three young children, I am mad that their education will be more expensive as a direct result of this policy. I’m also mad that it will seem further out of reach to the children who aren’t as fortunate financially as my kids. But I’m not mad at those who received the money. I’m mad at the politicians who thought it was a good idea to hand it out.