Americans have an estimated $1.6 trillion in student debt. About 43 million Americans are still paying off their college loans, and that can be a heavy burden, depending on how much was borrowed.
Democratic Presidential candidates Bernie Sanders and Elizabeth Warren have plans to help eliminate that debt. Warren says she would cancel up to $640 million in student debt, while Sanders will go all the way.
The socialist’s plan wants to eliminate all student debt from public and private loans. He would finance the debt-forgiveness with a tax on financial transactions.
No doubt this is popular with everyone who is still paying for their college, but here are a couple things to keep in mind.
First, a report by the Urban Institute finds more well-off Americans would benefit the most from the debt forgiveness.
“According to our updated analysis of the Survey of Consumer Finances for 2016 (the best available data, though imperfect), the most affluent households—the top 25 percent of the households with the highest earnings—held 34 percent of all outstanding education debt.”
“The top 10 percent of households, with incomes of $173,000 or higher, held 11 percent of the debt,” the Urban Institute reported. “Households with the lowest incomes—less than $27,000 or less—hold only 12 percent of the debt.”
Thus, a comprehensive debt forgiveness would be regressive, “providing the largest monetary benefits to those with the highest incomes.”
Second, what does wiping away the college debt say to those millions of former students who paid back their loans, saved for college, worked to put themselves through college, chose a more reasonably priced institution, or all of the above?
Talk about unfair!
But Sanders, Warren and others do have a legitimate point about the rising cost of higher education. The College Board reports that for the 2018-2019 school year, tuition and fees at public state colleges average $10,230 for in-state students and $26,290 for out-of-state students. Private college tuition averages nearly $36,000 annually.
Public higher education institutions say their costs continue to rise while state government support declines, forcing more costs to be passed on to students. Additionally, colleges engage in a kind of arms race of new facilities, amenities and prestigious faculty to attract students.
If colleges aren’t careful, they are going to price themselves out of the market, as students figure out they can do just as well with an associates degree, on-line courses or an education in the trades.
That’s a challenge that higher education is going to have to figure out. But in the meantime, canceling every former students’ debt is just pandering, as well as significantly discriminatory against those who worked hard, saved and made sacrifices to get their college education.