Student Loan Forgiveness Is Unfair and Ignores the Bigger Issue
Student debt is a real issue. But free loan forgiveness will just make things worse. Art: Faizah El-Gamasy
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By ALVIN YAN
If you’re planning on going to college, you’ve probably heard horror stories about student loans. The fact is, many college graduates end up with a large amount of debt, some of which require decades to fully pay off. To combat the financial burden caused by these loans, President Joe Biden announced in August a student loan forgiveness plan that would effectively erase $10,000 in loans from any borrower whose yearly salary falls below $125,000. Erasing debt sounds nice for sure, but is it the best option available?
For context, 55 percent of students from public institutions and 57 percent from private nonprofit institutions took out student loans to pay for college. These loans totaled $1.75 trillion as of September 2022, with an average of $28,950 per borrower. While Biden’s plan may seem like a good solution to this problem at first, it has major flaws that make it ill-suited for implementation.
A big issue with the plan is that it disproportionately benefits the currently wealthy and the soon-to-be wealthy, as people who graduate from college typically see higher salaries compared to those with just a high school diploma.
Bachelor’s degree holders earn on average $1.2 million over their lifetime. That number increases with higher qualifications: master’s degree holders will earn about $1.6 million, doctoral degree holders $2.4 million, and professional degree holders $3.1 million.
College graduates also have much better job security and employment benefits compared to those without a degree. They are more likely to land well-paying jobs and be able to stay employed. It becomes obvious that these folks should not be the intended recipients for loan forgiveness.
Secondly, Biden’s plan doesn’t address the root cause of the problem: colleges are charging way too much money.
The cost of attendance, which includes tuition, fees, and room and board, has risen dramatically over the years. Since 1990, sticker prices have increased by around 100 percent across the board.
This upward trend has been accompanied by a steep jump in federal aid. Based on a Federal Reserve Bank of New York report, for every dollar that the federal government increases in subsidized student loans, institutions raise their tuition by 60 cents.
This shows that increasing government assistance will only incentivize colleges to jack up their prices even more. Now think about what will happen when student debt is canceled en masse. That’s right, colleges will charge even more to match the government aid coming in.
This all comes at a huge detriment to taxpayers as well. If $10,000 is given to all borrowers, it would amount to roughly $260 billion. This is hundreds of billions of dollars of taxpayer money that could potentially be spent on more pressing issues such as climate change.
The debt forgiveness plan is analogous to putting a bandaid on a stab wound while the knife is still in the flesh. Instead of targeting the greed in these institutions (colleges are businesses after all), the federal government chose to appease the public by throwing money at them.
Student loan forgiveness is a borderline regressive policy that ultimately fails to complete its intended purpose. The people that benefit from this plan have already graduated from college, while the current generation of students will be left to deal with record-high inflation levels perpetuated by the very tax dollars that we pay.