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Aug. 24, President Joe Biden announced that his administration would cancel up to $20,000 in federal student loan debt. Predictably, conservatives blasted the move and liberals extolled the move. However, the issue is a complex and multifaceted one—and one that conservatives should reconsider their position on.
As conservatives have long pointed out, the federal government is indeed responsible for this mess in the first place. As a corollary to that, other conservatives’ demands for a long-term exit of the federal government—and its money—from higher education entirely are well-advised.
But how did this situation come about in the first place? To use a Roman truism, cui bono, who benefits?
The answer, of course, is twofold: on the one hand, predatory loan companies, eyes ballooned cartoonishly into dollar signs, saw the opportunity early on to rake in easy thousands; thus, these companies supported every move by the federal government into higher education through lobbying and cronyism. On the other hand, the bloated bureaucracies of public universities benefited; as federal government-backed funds poured into the market, university administrators could afford to hire ever-more bureaucrats for ever-more wasteful positions—see, for instance, the payroll of the Gantt Center at Clemson.
Thus, both loan companies and public universities had incentives to push for the federal government to push ever deeper into the secondary education marketplace, in turn ballooning loan and university profits alike.
The cronies of lawmakers benefited. Who lost? Everyone else.
A few decades ago everyone, even students from substantially poor families, could enter and pay for college through good old fashioned up-by-the-bootstraps mentality. But in discourse today, many are correctly criticized for disregarding how greatly the difficulty of affording a college education has increased.
For instance: according to the National Center for Education Statistics, back in 1970, the average in-state tuition and fees for one year at a public non-profit university was $394. By 2020, that amount had skyrocketed to $10,560—a 2,580% increase. Today, students from incomes across the board have an average debt upon leaving college of $28,400, according to a compilation of data from the Federal Reserve, CollegeBoard, the Institute for College Access and Success and Saving for College.
And still, whatever the trade schoolers may say, many people, particularly the very poor—due to their aspirations or expectations for their life and career—have effectively no choice but to take these loans if they wish to achieve the dreams they have set for themselves.
To tell a would-be great architect to become a welder instead is the inhumane position of those who have at every turn abandoned dreams for a cold, dead “reality”; and yet, what expedient remains to the extremely poor would-be architect except to take student loans after decades of federal meddling and cronyism? It is not, despite the presentation of many to the contrary, only gender studies majors who have student loans.
Without the collusion of financiers and avaricious university boards, tuition rates would almost certainly be within affordable rates for even the poorest.
Many critics of the cancellation have egregiously misportrayed the cancellation as a tax on the poor working class to pay for the student loans of pampered rich children.
These criticisms seem to disregard several key facts.
First, the non-college educated working class are not the only ones who pay taxes—the unspoken implication of the claim that the working class, somehow, are paying for the debts of the ultra-rich; in fact, many college-educated taxpayers will, within only a year of the cancellation, have paid an almost equal amount back to the Treasury as the cancellation cost it. For instance, on a relatively low, entry-level salary of $42,000, the federal government seizes around $9,000 a year. Taking into account tax refunds, these figures still end up with college-educated taxpayers who receive a $10,000 cancellation “paying off their debt” to the federal government within two years.
Second, the presentation of recipients of this cancellation as the pampered rich is equally fallacious. Under the terms of Biden’s cancellation, many borrowers are eligible for at least $10,000 in cancellation but only Pell Grant recipients—a federal need-based grant—are eligible for the maximum cancellation of $20,000; but to be eligible for any cancellation, a candidate’s annual salary must be less than $125,000 per year. While the scheme can be criticized for its progressive weighting, to present the plan as a free gift to the rich and elite is simply misguided—in part because the children of the rich and the elite are the least likely to need such loans in the first place.
The necessity of the cancellation was, in the first place, driven by years of neglect and mismanagement by the federal government and calculated scheming by predatory loan companies who, in contrast to every other type of lender, achieved the coup of making it impossible to default on student loans in bankruptcy proceedings.
When, for instance, an incorrectly-imprisoned convict is exonerated after an extended sentence, the state often pays seven-figure settlements to attempt to make up for the injustice. Few people from either side of the political aisle express opposition to such settlements, which are themselves at the expense of the taxpayers of a state or community.
Biden’s scheme is lightyears from perfect: it should do more to punish the cronies who allowed this situation to unravel in the first place; it should particularly go after the endowments of universities, who were complicit. It indeed, as many have pointed out, runs the risk of moral hazard, a situation wherein more people will be inspired to take loans in the future in the hope of further cancellations. It indeed does nothing to address the root cause of the situation, federal overreach into higher education.
The federal government has long been correctly charged with out-of-control spending and overregulating the economy. Still—the modern world is one of cronyism and corporate welfare, a world where the U.S. disperses billions in foreign aid to every comer; rarely does a policy benefit the middle-class—who pay the bulk of federal taxes—so clearly and immediately. Between 2013 and 2018, the U.S. sent approximately $283 billion in foreign aid—almost as much as Biden’s loan cancellation costs.
On Aug. 25, millions of Americans woke up relieved in part or in full of a debt that, if not for the crimes of the federal government, financiers, and universities against them, they never would have been compelled to take in the first place. Tax dollars, if they must be used, should be used in a way that truly benefits American households; on a micro level, there can be no doubt that this cancellation does.