Only a Little Forgiveness for Old Debts

I came across this parsimonious student loan forgiveness proposal in a tweet earlier today.  The author, Beth Akers, even had the nerve to call this stingy proposal a student-loan jubilee.  The $5000 (which isn’t even cash, but a 1-time tax credit), is just 1/6th the average total student debt for recent college graduates.  She ends her piece this way:

More than half of Americans have built their lives and made ends meet without a college degree.  Call universal student loan cancellation what it is: elitist.

The conservative think tank crowd never seems to have a problem with the government giving away money to businesses, and are quick to hand wave away any evidence of abuse of such programs by big businesses. But the moment there’s even a chance of the government doing something to help individuals, we get to hear a lot of concern about taxes and budgets, along with faux populism.

A cursory amount of digging reveals that the picture of who owes student loan debt is different than the stereotypical “whiny millennial” (some of whom are much closer to 40 than they are to 20).  A Forbes piece from February of this year is particularly enlightening.  The piece is worth reading in full but here are some of the facts I found most interesting:

  • Of the $1.6 trillion in student debt owed, Texas and Florida rank 2nd and 3rd in the number of borrowers and amounts owed (California and New York rank 1st and 4th).
  • Ohio, Illinois, and Michigan are also in the top 10 by number of borrowers and amounts owed
  • Arizona and Florida rank 1st and 3rd in the nation in average student loan debt per capita
  • Over $300 billion of that $1.6 trillion is owed by people aged 50 or older.
  • The 50+ cohort of student loan borrowers is about the same size as the 24 and younger cohort (a little over 8 million borrowers), but the amount they owe is nearly triple the size of their younger counterparts.

So not only is student loan debt not merely the province of the young, nor is it restricted to “coastal elites”.  You could be eligible for retirement and still owe Sallie Mae.  If the student loans you owe are private, there’s no guarantee that debt will be forgiven upon your death.

I am quite fortunate when it comes to student loan debt.  Graduating with a computer science degree from a state university with zero debt (thanks to parents who paid in full, and a state smart enough to subsidize in-state tuition) meant that I didn’t incur any student loan debt until I decided to go to grad school.  In the interim, I was able to buy a home.

Attending grad school part-time at night while working full-time (as my parents did for their undergraduate and graduate degrees, while raising my sister and I) and paying at least some tuition while in school mean that the amount I currently owe is well below the average for recent college graduates.  Even so, it will be another decade from now before I’ve finished paying off Sallie Mae.  I’ll be thinking seriously about higher education for my own children then, since my twins will be in high school 10 years from now.

What the green eyeshade crowd is missing is that the $1.6 trillion owed by students is preventing them from putting their earnings elsewhere in the economy, such as home ownership or investment.  That debt is almost certainly a factor in whether or not people choose to have children.  Akers harking back to an era where a college degree was not a necessity to live a middle class life does not change the facts about the type of globalized economy we live in today.  Nor does it change the fact that automation isn’t just changing “low-skilled” labor, but also some of the jobs that a college degree formerly provided a gateway to. If you actually want to grow the middle class in the United States in anything approaching a sustainable fashion, a solution to student loan debt (both the current amounts, and a mechanism to prevent forgiven debt from simply growing back to even higher amounts) is just one part of a larger conversation.