Student loans have worked their way into the lives of so many Americans it's practically considered just part of becoming an adult. After high school it's the military, trade school (thank the lord those are beginning to rise in popularity), or drown yourself in college debt. According to educationdata.com, we are approaching 20% of Americans holding college debt of some kind. That is almost one in 5 people with the total federal loan balance adds up to 1.65 trillion dollars. While that is certainly a massive outstanding balance, apparently the government just operates in trillions now. Maybe if they called it the war on student debt we suddenly would have no problem addressing it.
To be clear, this article walks through what I believe is the only acceptable way to forgive government student loans IF the government were to do it. If being the key word. It is a difficult subject to find true middle ground on as the vast majority of the 80% of American who never took out student loans argue they shouldn't have to pay them, and rightfully so. The vast majority of the 20% that are in favor of forgiveness argue on the grounds that school should just be free anyway. I don’t believe college should be free and I don’t believe that the masses should foot the bill either. But, I do believe the government royalty screwed up the entire college education system.
As the title states and the introduction implies, this is a case for the forgiving of student loan debt. In my opinion, the only acceptable case IF the government were to try and do so. The government could do so with a few stipulations.
1-Admit that they have completely ruined the public education system from K-graduate school.
2-Completely remove themselves from the education system across the board.
3-Allow education to be ran at the state level as the states see fit.
4-Through their admittance and acceptance of sabotaging so many Americans, many of which at such a young age, forgive the debt.
5-Never be involved in the financing or financial guaranteeing of anything ever again.
Whether it be houses, cars, or student loans, the federal government has zero authority or responsibility to take on that responsibility. In every instance in the past when they have done so, it has turned out to be a failure that ends up doing more damage than good. This is because politicians are not economists and they don't listen to any of them that actually know what they are talking about. The government ruined housing in 2008, they had the costly failure of a system called cash for clunkers, they have been undermining the banking system for more than a decade at this point and we are starting to see the effects of that. Education is no different when it comes to their capability to completely wreck the entire system.
There is one major problem that will arise with education that is unique, which is one of the strongest bullet points when it comes to supporting the forgiving of the loans. That is, unlike a house or a car, or even a business, you cannot sell that piece of paper you get. You can, in theory, in the form of labor. But, in many cases, even that labor is not worth the degree backing it. I was listening to a podcast the other day where an individual described how they spent tens of thousands of dollars on a degree in ancient history of some kind. The only job they could get was working in a museum or traveling halfway across the world, both of which paid practically nothing compared to what they spent in education. Their solution, they went to graduate school to become a teacher in the very subject they know can’t pay for itself. While I 100% agree that said individual signed those loans and made those decisions, my argument stems from the fact that these kinds of issues would have never been a problem in the first place if the government had never involved themselves in college education in the first place.
In the example above, in a properly operating economy without the government's intervention one of two things would have happened. The cost for the degree wouldn't have been pushed up above what the post graduate wage would be and the individual could privately finance it if they chose to do so. An education financial professional who actually is concerned with getting paid back would have walked through a plan from entry to college through repayment to see if it was viable. The second option would have been that they didn't go to school, or that school, for that degree. Maybe they would have looked into the job before going to school and decided it wasn't for them. Or maybe there would be alternative options like apprenticeships. Regardless, at the end of the day, there would have been a much more careful cost and benefit analysis on the part of more parties, instead of the “I want to go learn about this and I'll figure out what to do with it later” approach.
Another bullet point supporting this idea is the economic impact. This may be counter intuitive, especially considering the inflationary issues that the country has been facing. Monetizing debt is a form of creating money. Creating money, expending the money supply, is inflation. I believe that the inflationary pressures created by the government's student loan program have already seated themselves firmly and securely in the economy. The impact of giving everyone however much money they need to go to school simply increases the demand for school and ultimately the cost. Schools are already wildly expensive. We have already been acting like this is free money and not a loan, so I honestly believe that the inflationary effects have been incorporated and visible in our economy for a very long time now. It's not like we are taking this money and buying groceries, cars, houses, and vacations. The impact is the wildly increasing price of school due to the effectively unlimited demand.
Accompanying this argument, there is actually a greater economic impact that will happen in the months following the requirement to pay. There will be a massive shift in the labor market. Demand for 70,80,100+ thousand dollar salary jobs will explode as loan holders will be doing everything they can to try and bring in enough income to pay for their loans. As stated before, that obviously is their problem, they are the ones who took the loans out. But, ultimately what that will cause is increases in prices. Labor is one of the most expensive inputs to business. Right now there are a lot of borrowers who are carrying student loans easily simply because payment has been “temporarily” paused. As soon as the government says start forking up that 300, 400, 500 dollars a month, those borrowers are going to start making moves.
The fact that I believe the inflationary effects of monetizing the debt paired with such a massive move in the labor market with demands of significantly higher wages, I do believe that once repayment starts, it's going to hurt. That is also why I believe that if the government ultimately does not forgive student loans, they will eventually indefinitely suspend payment on the grounds of the damage repaying is doing to the economy. That would only make a bad problem worse and ultimately have worse outcomes. That is also why above I stated a list of requirements IF they were to move forward with something like this at all. It cannot be a best of both worlds scenario for the government.
The biggest issue with forgiving student debt, one that I believe may hold enough weight to counter everything said up to this point, is the principal of the matter. At the end of the day those 43 million plus borrowers agreed to take out the loans. They knew, or at least said they knew, what they were signing up for. It is no one else's responsibility to pay for their debts. This is the hardest pill to swallow being that self responsibility is already being completely destroyed as a value and principal in our modern society. Moving forward with a program like this could continue to support that ever pressing change in ideals. But, as stated, that is why in my list of requirements it would be necessary for the government to completely back out of the financing and/or guaranteeing of student loans. Ultimately that would expose the lie that spending $40,000 on a degree for a job that pays $35,000 a year is ok. It simply is not, and it is killing this nation.
At the end of the day, am I in favor of forgiving, canceling, monetizing student debt? If and only if the government did it in the manner that I described, I would not be opposed to it. The reality of the situation is they would never do that, therefore I am not in favor of their current plan and ideas. Like pretty much any economic, political, or social issue, this is not a blanket yes or no conversation. The reason I am in favor of it in the manner in which I described is because I honestly believe the nation and the economy would be better off. It would take a massive piece of humble pie from the government and student loan holders. It would be the recognition from the government that they completely screwed up and that their policies were the cause of this entire mess. They are going to have to take the black eye, admit that they are compromising principal and values for the sake of bettering the country and the economy down the road, and the legislative promise that they will not be legally capable of creating systems like this again in the future.
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