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It’s Time to Forgive Student Debt

As our season on rebuilding a better America after COVID winds down, we’re taking a look at one of the essential facets of our democratic society: our higher education system. 

Mila sat down with long-time Bard College president Leon Botstein to understand why the higher education system in America is failing so many of us and how we must fix it for the good of the Republic. He lamented the lapse in critical thinking that delivered us Trump and laid out simple measures we must take to make sure it doesn’t happen again. 

“What has happened in the last 50 years, at least, is that the high school education is no longer an adequate endpoint for education, that universal access to higher education now needs to be provided,” he explained to Mila. 

Listen to our full interview with Leon Botstein here! 

“A bachelor’s degree is probably the minimum standard in order to enable an individual to take a place in the economic system,” he concluded. A world with mandatory four-year degrees seems like a pipe-dream for most. Still, for Botstein, it’s the only way to ensure Americans are graduating with the skills they need to navigate life, both civically and economically. 

Education reform can take generations, but Botstein laid out one critical policy proscription that could be done with the stroke of a pen: forgiving student debt. 

“The loan system that now exists has to be revised and the existing student loans that are a huge drag on people’s lives and the economy have to be refinanced and carefully eliminated,” he postulated. “The system is bankrupt and should be declared bankrupt, and therefore all the liabilities should be set aside and a new rational system put in its place.”

Botstein isn’t alone in his call to eliminate student debt—around the country, or even on Future Hindsight. Our recent guest Zach Carter—author of a new biography of John Maynard Keynes– shared a similar thought on Twitter recently.

Botstein and Carter are both making the point that relieving student debt helps the economy, and consequently, the country. For Carter, it’s obvious: increased spending leads to a more robust economy, and relieving student debt leads to increased spending. For Botstein, forgiving more than $1.5 trillion in US student loans is only the first step in making higher education affordable for all—a democratic necessity in his eyes.

Forgiving student debt may seem revolutionary, but it’s just common sense. Consider the numbers: the cost of private college is more than $37,000 per year on average, and the average 2019 college graduate owes more than $29,000. Students in the US owe significantly more than their counterparts in other countries, and this problem will play out for decades to come as these students age. 

Millennials are set to become the first generation in American history that ended up poorer than their parents. An overwhelming number of student loan holders say it will impact their retirement. Student loan debt makes it harder to start a small business, harder to buy a home, and harder to start a family. Pick a metric of financial or social success in America, and student debt probably makes it harder to achieve. When we desperately need economic stimulation, student debt is the monkey on millions of spenders’ backs.

Joe Biden has clarified that student loan forgiveness will be on the docket once he becomes the 46th president but remains vague on how much forgiveness could occur. His campaign plan included forgiveness for borrowers who “responsibly made payments” for more than 20 years. Yes, more than 20 years. It also contains carve-outs for public servants, up to $10k per year. 

Many argue that relief should go further. In fact, eliminating some student debt is popular among most Americans. A more recent—and more exciting—plan calls for Biden to use his executive powers to cut $50,000 in student debt per student. Senator Elizabeth Warren argues that Biden can use executive orders to undo debt. However, without backing in both houses of Congress, a bid to eliminate student debt might end up in the Supreme Court—a court that sides with prosperous America over poor America at every turn.

Biden should take whatever steps he can to end the student debt crisis once he assumes the presidential mantle. Unfortunately, if the Senate remains in the GOP’s clutches, he may be limited to executive actions. Mitch McConnell has little sympathy for Americans with student debt and even less willingness to work with Democratic lawmakers.  

Eliminating student debt could immediately increase the purchasing power of 1-in-6 Americans. It would allow Millennials and Gen Z Americans to start saving, spending, and planning for their future. It’s the epitome of the Keynesian logic that lifted us out of the Great Depression, and as America peers off a financial cliff of similar size, the choice is clear. We need debt relief, we need it now, and to make sure it happens appropriately, we need a Democratic Senate.

Ben Miller, Colleen Campbell. “Addressing the $1.5 Trillion in Federal Student Loan Debt.” Center for American Progress, www.americanprogress.org/issues/education-postsecondary/reports/2019/06/12/470893/addressing-1-5-trillion-federal-student-loan-debt/. 

“Exclusive: House Democrats Call on Biden to Forgive $50,000 of Borrowers’ Student Debt .” Exclusive: House Democrats Call on Biden to Forgive $50,000 of Borrowers’ Student Debt, www.msn.com/en-us/news/us/exclusive-house-democrats-call-on-biden-to-forgive-50-000-of-borrowers-student-debt/ar-BB1c0RVX. 

Farrington, Robert. “Can Biden Really Forgive Student Loans By Executive Order?” Forbes, Forbes Magazine, 17 Dec. 2020, www.forbes.com/sites/robertfarrington/2020/12/17/can-biden-really-forgive-student-loans-by-executive-order/?sh=66ec0c561eed. 

Hoffower, Hillary. “61% Of Millennials Said They’ve Delayed Buying a House Because of Student-Loan Debt, a New Study Found.” Business Insider, Business Insider, 26 Sept. 2019, www.businessinsider.com/millennials-delaying-homeownership-student-loan-debt-2019-9. 

Investor, The College. “Survey: 73% of Americans Support Biden’s Plan to Forgive $10,000 in Student Loan Debt.” AP NEWS, Associated Press, 17 Dec. 2020, apnews.com/press-release/prcom/student-financial-aid-social-affairs-education-costs-higher-education-education-d3e8ee3c524f57f863e206c12d4d4a03. 

Jdickler. “Student Loan Debt Is a Hurdle for Many Would-Be Mothers.” CNBC, CNBC, 22 May 2018, www.cnbc.com/2018/05/22/student-loan-debt-is-a-hurdle-for-many-would-be-mothers.html. 

Leonhardt, Megan. “84% Of Borrowers Say Student Loans Are Tanking Their Retirement Savings.” CNBC, CNBC, 8 Aug. 2019, www.cnbc.com/2019/08/08/84-percent-of-borrowers-say-student-loans-are-tanking-their-retirement.html. 

Lowrey, Annie. “Millennials Don’t Stand a Chance.” The Atlantic, Atlantic Media Company, 15 May 2020, www.theatlantic.com/ideas/archive/2020/04/millennials-are-new-lost-generation/609832/. 

The Organisation for Economic Co-Operation and Development, 2012, EDUCATION INDICATORS IN FOCUS: How Are Countries around the World Supporting Students in Higher Education? 

“Supreme Inequality: Adam Cohen.” Future Hindsight, www.futurehindsight.com/episode/supreme-inequality-adam-cohen/. 

Terkel, Amanda. “Mitch McConnell’s Solution To Soaring Student Debt: Less Yale, More For-Profit Schools.” HuffPost, HuffPost, 14 July 2014, www.huffpost.com/entry/mitch-mcconnell-student-debt_n_5585521?guccounter=1. 

“Trends in College Pricing 2019 Highlights.” Research, 26 Oct. 2020, research.collegeboard.org/trends/college-pricing/highlights. 

“U.S. Student Loan Debt Statistics for 2020.” Student Loan Hero, 27 Feb. 2020, studentloanhero.com/student-loan-debt-statistics/. 

Warren, Elizabeth. Press Release. “Schumer, Warren: The Next President Can and Should Cancel Up To $50,000 In Student Loan Debt Immediately; Democrats Outline Plan for Immediate Action in 2021” https://www.warren.senate.gov/newsroom/press-releases/schumer-warren-the-next-president-can-and-should-cancel-up-to-50000-in-student-loan-debt-immediately-democrats-outline-plan-for-immediate-action-in-2021

Zimmermann@stlouisfed.org, and Brent W. Ambrose & Lawrence R. Cordell & Shuwei Ma. “The Impact of Student Loan Debt on Small Business Formation, by Brent W. Ambrose; Lawrence R. Cordell; Shuwei Ma.” Working Papers, Federal Reserve Bank of Philadelphia, 1 July 2015, ideas.repec.org/p/fip/fedpwp/15-26.html. 

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