Recently, the Biden administration announced it is entertaining a $10,000 debt cancellation for some federal student loan borrowers, while progressive lawmakers are pressuring the administration to cancel at least $50,000. While student debt forgiveness may curry short-term favor with some young Americans, it will not address the systemic problems created by the higher education cartel — the unholy alliance of college administrators, Sallie Mae, and the federal government that allows all three to line their pockets at the expense of American students. Rather than attempt a quick fix on the student loan debt crisis, the American people must demand reform in higher education, challenging the culture and the policies established by the cartel that has made college education simply unaffordable.
The timing of the Biden administration’s announcement comes as no surprise, with NPR recently reporting that Biden’s favorability rating among Gen Z has plunged to 37 percent, the lowest out of any age group in the U.S.
Biden appears to be following the George Bernard Shaw Doctrine: “A government that robs Peter to pay Paul can always depend on the support of Paul.”
Unsurprisingly, however, despite the viral appeals of online “Pauls” you might find scrolling on TikTok, the “Peters” are not shying away from their opposition to the proposal. As reported by the Washington Examiner, 47 percent of the American public believes forgiving student loans would be unfair to those who have already paid off their debts; and 60 percent of those polled believe those who chose not to attend college shouldn’t have to foot the bill.
There is no shortage of logical arguments and emotional appeals against canceling student loan debt. With a crippling $30 trillion worth of debt (not counting unfunded liabilities), D.C. simply can’t afford another $1.75 trillion expenditure. The majority of debt is held by people with master’s and doctoral degrees. Canceling these high-powered individuals’ debts would be robbing the poor to pay the rich. Transferring massive wealth from the working class to pay the bill of the Ivy League elite is morally repugnant by progressive standards.
Most importantly, forgiving existing student loan debt does nothing to disincentivize the higher education cartel from keeping a college education increasingly unaffordable.
Forgiving existing student debt will not crush the crony alliance between Sallie Mae and the federal government. The Nixon-bred finance leviathan will still make billions off interest, commissions, and fees from D.C.-guaranteed student loans, at the expense of future students drowning in debt.
Forgiving existing student debt will not change the fact that 92 percent of all student loans are federally guaranteed. With this kind of certainty, university bureaucrats can both continue to increase the cost of tuition (which has doubled over the last two decades across both private and public colleges), while also spending more on fellow bureaucrats than they do on instructors. Look at Ithaca College in upstate New York, where entire academic departments and professors were laid off while some administrators enjoyed 30 percent annual pay raises with perks. Canceling student debt won’t stop that from happening.
Instead of simply deferring student loan debt to the next generation, we should be working on long-term solutions now. Here are four alternatives to canceling student debt that would more definitively empower young Americans:
Stop telling kids college is the only path to success. This flavor of propaganda is perhaps best reflected in the 2006 film Accepted, where the college-averse main character’s father reads him the riot act: “Society has rules. And the first rule is you go to college. You want to have a happy and successful life? You go to college. If you want to be somebody, you go to college. If you want to fit in, you go to college.” This type of thinking, among other consequences, has left America with a shortage of trade workers, which exacerbated the recent supply chain crisis. Meanwhile, a trade school certificate costs a fraction of a four-year liberal arts diploma, with similar to higher wages to boot.
Unleash the investment potential of education savings accounts. While parents saving up for their children’s education can enjoy tax-free withdrawals to pay for tuition and books while investing in plans like 529s and Coverdell ESAs, they face a litany of IRS restrictions on how that money can grow. 529s block investments in ETFs, mutual funds, and individual stocks, and Coverdell ESAs have a maximum contribution limit of $2,000 per year — even less for families above certain thresholds. It’s time to cut the red tape and give parents the financial freedom to create a better life for their children.
Return bankruptcy to student loan debt. A convoluted set of regulations makes it notoriously hard to declare bankruptcy on student loan debt compared to nearly all other forms of debt. Relaxing these rules would not only give young Americans an out from the currently broken system, but also disincentivize the issuers of student loans from rubber-stamping $100,000 loans for BAs in underwater basket weaving.
Abolish federal student loans altogether. This would be the nail in the coffin for the higher education cartel. Once tax dollars stop flowing in perpetuity, universities will have to course-correct, trim the fat in their budgets, and adjust the price of admission to a free market rate.
Blue-collar Americans should not be on the hook to bail the gender studies majors and McKinsey associates out of debt. This hypothetical scenario shouldn’t even be on the table. Rather than wave a magic federal wand and sweep the student debt crisis under the rug, we should seek to completely dismantle the higher education cartel.
Sean Themea serves as chief of staff for Young Americans for Liberty and is a Contributor for Young Voices. A recovering progressive, Sean has been published in The Federalist and has appeared on Fox Business, Newsmax, The First TV, and OAN.