In light of the looming student debt crisis, the Biden-Harris administration has presented a plan to forgive $10,000 of federal student loan debt for each borrower. That’s a far cry from the full cancellation of student debt, as some 55% of Americans would like.
As a former student and graduate of a public university, and a borrower encumbered by tens of thousands of dollars of federal student debt, I have seen firsthand the impetus for these calls.
Supporters of total forgiveness argue that President Joe Biden's plan fails to adequately address nearly 30 million Americans with debts above the proposed threshold, thereby failing to stimulate the economy or address the injustices of the system in place.
But what are these injustices, exactly? For one, while students are expected to pay back the loans they take on, that same expectation does not always apply to large-scale corporations. In the 2008 bank bailout, the federal government spent billions to rescue companies like Bank of America, Morgan Stanley and General Motors from bankruptcy.
Currently, student debt is our second-largest debt category, behind only home mortgages; it accounts for a staggering $1.67 trillion owed across some 45 million borrowers. The government, by the Congressional Budget Office’s account, collects annual multibillion-dollar yields off of these debtors: a whopping $135 billion between 2005-2015.
One might reasonably question the moral considerations of a state that enters into such lucrative credit arrangements, especially given that a college degree is required or expected for nearly two-thirds of jobs in this county.
Federal interest rates on student loans sit at 4.5 to 7.5%, higher than the average for a 30-year fixed mortgage (3.8%), a 60-month car loan (4.5%) or the current 10-Year Treasury Lending Rate of 1.1%.
If many students are unable to pay back these loans because of inadequate wages, then interest rates will rise, sending the whole entanglement in a downward spiral. The ever-present stagnation of wages pairs with the exponentially rising costs of college to create a situation where it is risky for a generation to seek the education they need to survive.
The government doesn’t bear the brunt of missed payments. Billion-dollar losses means little when you can leverage your college-educated taxpayers, who contribute some $381,000 more in taxes than they receive in benefits over their lifetimes. The state is cushioned by an infrastructure that all but ensures it will get its money’s worth.
If the government wanted to help create a sustainable future workforce, it would cap the cost of public higher education, support adequate wages and prosecute those who fashion dangerous financial instruments.
More than 325 organizations have echoed the call for a cancellation of federal student debt in a letter to the new administration, including the NAACP, the Hispanic Federation, the National Women’s Law Center and the American Psychological Association. A growing number of politicians — including Rep. Alexandria Ocasio Cortez, D-N.Y., Rep. Ayanna Presley, D-Mass., and Sen. Bernie Sanders, I-Vt. — have encouraged Biden to unilaterally cancel the debt, a move deemed "lawful and permissible" in an analysis by three legal experts at Harvard University this fall.
It is time for a cancellation of student loans, accompanied by debt-free tuition to public universities. We do not owe the government tribute for seeking the means for survival; we are owed these opportunities.
Jacob H. Weissman wrote this piece for the Progressive Media Project.