Last week President Joe Biden finally announced his college loan forgiveness plan.
Under Biden’s plan, people can have up to $10,000 in federal student loan program debt forgiven. That figure rises to $20,000 for people who also qualified for need-based Pell Grants.
It’s far less loan forgiveness than progressive activists wanted, and the Pell Grant stipulation helps direct loan relief toward those who most need it.
Unfortunately, Biden’s proposal still amounts to a net transfer from the relatively less well off (those who didn’t go to college at all) to the relatively better off (those who did attend college). Student debt isn’t simply forgiven. It falls on taxpayers. Also, one could ask what makes college debt so special, as opposed to credit card debt?
The answer is that the cost of higher education has skyrocketed. According to a report from the Georgetown University Center on Education and the Workforce, the total cost of college — tuition, room and board, fees, books, etc. — has gone up 169% since 1980. Like health care, the cost of higher education has risen far faster than the overall rate of inflation over the last several decades.
As such, it has become an oppressive burden for many college grads.
Biden’s plan, however, does nothing to address rising higher ed costs. Instead, by setting a precedent of loan forgiveness, it incentivizes colleges and universities to keep raising tuition and fees, and it encourages more college students to take out loans without thinking about how they will pay those loans off.
Loan forgiveness takes a problem that is essentially one of supply — people are demanding more higher education than ever before — and tries to solve it by subsidizing even more demand.
Is it any wonder that things the government tries to make “affordable” keep becoming less so? While the federal government subsidizes demand for college, health care and housing, the prices of all of those continue up at a rate faster than inflation.
Meanwhile, the inflation-adjusted prices of televisions, computers, cellphones, clothing and cars have all gone down over the past 20 years, according to figures from the Bureau of Labor Statistics. The difference? The government doesn’t subsidize any of those items.
Biden’s loan forgiveness may be a short-term boon for the many college graduates who have have gotten caught in a debt trap not entirely of their own making. But it will do nothing to increase the supply of higher education or direct students to the sorts of higher education they need. The government subsidizes all college degrees the same, whether they are in computer science and engineering or English literature and philosophy.
None of this is to denigrate English lit, philosophy or other humanities. We need people who have studied those fields. But all of these fields don’t lead to careers that pay the same — or provide the same ability to repay loans. It defies common sense for student loans — and college tuition — not to be structured in such a way that takes this into account.
For many well-paying fields — if that’s all one is interested in — a four-year degree isn’t necessary. A two-year junior college degree fits the bill.
Some have proposed simply capping tuition. That’s a recipe for disaster. Imagine the gas lines of the 1970s, but for higher education.
More systemic reform is needed, and simple loan forgiveness isn’t it.