Student Loan Forgiveness: A Bad Idea Disguised

Student Placement and Financial Aid office, UTA campus, no date. Via Wikimedia Commons

Student loan forgiveness is not a good idea… Not without other reforms. It is a Band-Aid on a sucking chest wound. Only about 35% of Americans have graduated with a bachelor’s degree. While this percentage increases nominally every year, these graduates are more than likely to be upper middle class to upper class. Expanding student loan forgiveness to advanced degrees is even more egregious. Having the rest of the country, in the form of taxpayers, pay back these loans is ridiculous. Why should the ones who made good decisions be punished while those who made bad decisions get rewarded?

Student loan debt totals approximately $1.7 trillion in America. That’s with a T. That’s a lot. No one forces you to take out a student loan, but, for most, it is a necessary element of going to college. Now, I don’t think college should be necessary, as one of my first articles here elucidated my hatred of credentialism. A four-year degree is a glorified job-hunting license. And a necessary requirement to go to law school or medical school. For reasons.

This is a case example of perverse incentives. Without fixing the system that led to this issue, we’ll be in the same boat a decade or two from now. And if that is the case, anyone with student loan debt after the initial tranche of forgiveness would be a damn fool to pay even a red cent towards repayment. But beyond that, it rewards bad behavior. Those who graduated without debt or have since paid off any debt related to their education become saps. They did the hard work to make sure they paid off their debt obligations. The others who didn’t likely forwent paying back their loans or skated by, paying the bare minimum. One of human nature’s many quirks is the feedback loop towards instant gratification, something social media did not create but merely amplified. (Social media is mostly a mirror, not a toxin.) Debt service is usually far down the list of things a person would want to spend their cash flow on, but it is also a wise thing to do. But free will exists, so we cannot force people to make good choices.

The Biden Administration, via one of the many COVID relief bills, made student loan forgiveness tax-free. Debt forgiveness normally counts as income, so this was to relieve these same largely rich people from having a massive tax bill if Biden eventually decides to forgive student debt in some way. I am very much against making any debt forgiveness tax-free. It is simply rewarding bad behavior, which generates perverse incentives. We should never incentivize bad behavior, especially on a government level.

As I talk of solutions and how important they are often here, what’s my plan? First off, credentialism is likely not being browbeaten down without decades of hard work, so that problem is not getting fixed soon or easily. Like entitlement reform, it will likely blow up in our faces before we as a society ever do anything about it. Practically speaking, if we can’t fix credentialism, there are not many choices left to fix the problem as that is a societal one. But there are some things. I think budding lawyers and doctors should just be able to apply from high school. Why is a four-year degree a necessary requirement? Doesn’t make much sense to me, dawg. The biggest thing we can try to do is normalizing the Associate’s Degree. Anyone who got a four-year degree knows how small a percentage of the total credits they earned actually went to their major. Associate’s Degrees are more targeted towards a field of study and only take two years. If we moved towards a system that prioritized a set number of credits in a particular field of study, Associate’s Degrees would be incentivized.

Unfortunately, that system will make community college more expensive, which ties into another problem. Four-year college degrees are, to quote Bud Dink, very expensive. The core issue at hand with all that is the spigot of easy cash, backed by the federal government. The Obama Administration essentially nationalized the student loan program in his first year in office. Colleges, aware this spigot is likely never shutting off, have responded unwisely but rationally: If the money will always come, keep raising prices to get more money now and forever. With all this extra cash, the colleges have done something stupid: Spent very little of the money on good things. The classroom and the endowment would have been great places, but, inevitably, most colleges do not put all this extra cash to good use where it’ll do actual good for current and future students. Administration, with a forever expanding list of offices that do very little but “require” paid staff, has been getting a lion’s share of this extra money. And maybe some new building construction, a task that is usually supposed to be funded with alumni giving, a problem my university especially suffers from. (It’s tuition-to-endowment ratio for operations is lopsided 75% to 25% towards tuition; most top tier universities have it the other way around.)

Most of the money paid in tuition should go towards the classroom. A logic that everyone should agree to as a basic understanding, but you’d be wrong to think that. I think most of it should be spent to make current students happy while in college so that when they do reach success, they are more likely to give money to the university as alumni giving. Professors who can actually teach well and aren’t just making the class difficult for difficulty’s sake (experienced that too many times) and student life like computer labs and fun programs after class and on the weekends. I don’t care whether a professor is on the tenure track or an adjunct/professor of practice. All I want is a professor that doesn’t actively hate his or her students. Prioritizing research in a “publish or perish” environment to stay on the tenure track means tenure track professors see teaching as a requirement and not a joy. The best professors I had were the ones I liked talking to after class. Usually, these were professors of practice who were not on the tenure track. They taught because they enjoyed it, molding young minds. A lot of them had a job in the field they taught and did teaching as a side gig.

Moving on… I was in college when the financial crisis of 2008 happened. The night and day difference between student life programs in that school year and the one that followed it was stark. Guess where the diminished endowment money hole in the budget hit? Doesn’t stop my university from calling me at least twice a year hitting me up for an alumni donation. I usually talk to the student calling, as it is virtually always a current student on financial aid doing this for a set hourly wage, and ask how the campus is now and giving advice, recommending good professors if they’re still there. Last time I talked to the student for nearly twenty minutes. They got paid to get good advice. I bet they liked that.

The only forgiveness I truly support is for those who didn’t graduate, but this needs to be measured. Once forgiven, the credits earned become non-transferable and said dropout is then ineligible to return to the school they got those same credits from to finish their degree. I wish to avoid abuse of the system, a lost cause if there ever was one, but one I genuinely believe in. Maybe put a ten-year window on dropouts (some do return.) I do wish debt forgiveness to be taxed as income, as it and all such forgiveness should, but payment plans would likely need to be given for any new such tax obligations.

I graduated with zero student loan debt, largely thanks to my parents (same with both of my siblings.) I make a decent wage (I wish I made more,) but I currently have zero debt of any kind. I have a credit card I pay off at the beginning of every month like clockwork. I desire more savings, but that’s beside the point. I am a genuinely happy person. My fiancé was the final puzzle piece. I met her in late 2020. Having generally inexpensive hobbies like low-priced collectibles collecting and movies (the AMC Stubs A-List makes this a very cheap hobby) means I don’t spend extravagantly or above my means almost ever. This is what most people don’t want to hear in the student loan forgiveness debate, but it is what it is: You are ultimately responsible for your own choices. Politicians love to rob people whose votes they want of agency. And it is a tactic that works well. Telling people that their bad choices aren’t their fault is very comforting, but it is a sweet that eats away at the enamel of your soul. Prioritizing buying a Tesla over paying back your student loans sounds like a “you problem.”