Canceling Student Loan Debt Isn’t Just A Dream. It Could Save The Economy.
What would you do if your student loan debt was eliminated?
Photo by Redd Angelo/Unsplash.
THE GOOD NEWS:
Cancelation of all student loan debt not only would yield benefits for young Americans, it would positively affect the economy overall.
The past few years has seen the emergence of a genre of journalistic hand-wringing that rests on the premise that millennials are destroying every industry their forebears painstakingly built. According to the headlines, millennials are “killing” casual dining chains like Applebee’s, napkins, “breastaurants,” the entire sport of golf, diamonds, even cereal. As tempting as it is to blame their inability to buy homes on a proclivity for expensive avocado toast — as one millionaire did — the answer might be a little bit more obvious than that: Millennials are overburdened with student loan debt.
The GOP, however, has been working hard over the past year to pass legislation that would eliminate student loan debt forgiveness programs, despite mounting evidence that student loan debt — which now amounts to more than $1.4 trillion in the U.S. — is bad for the economy. A new study published by public policy think tank the Levy Economics Institute finds that the cancellation of all student loan debt not only would yield benefits for young Americans, but would positively affect the economy overall.
The researchers found that, freed up from their student loan obligations, millennials would be able to afford to make other financial decisions that would help buoy the economy, like buying a home or starting a new business. Last October, the National Association of Realtors released a study reporting that student loan debt compelled millennials to delay home-buying by an average of seven years. Additionally, other forms of spending — cars, vacations, or, you know, avo toast — could help create jobs in other sectors.
But student loan cancellation could help alleviate other immaterial consequences of the debt crisis. A Gallup-Purdue poll from 2014 reveals that the acquisition of student loan debt affected the mental well-being of college graduates, negatively influencing their sense of purpose and their social lives. Other studies found that those with debt were more likely to experience depression and even develop physiological responses to stress, like higher blood pressure. Beyond the personal effects for millennials, consider this: An unhealthy workforce is not a productive one and does not bode well for the overall economy.
Absorbing the national student loan debt would put the government an additional $1.4 trillion in the hole. That, however, is about the same cost as the GOP’s tax plan, according to the Congressional Budget Office; not to mention their tax plan could disproportionately hurt the poor and provide extensive cuts for the rich. In addition, the GOP has lagged on reauthorizing the Higher Education Act (last reauthorized in 2008 by President Obama); instead, they’re introducing new changes to the legislation that would end the loan forgiveness program for public service workers and limit student repayment plans from eight to two options, among other things.
Not all Republicans are championing this plan. Last October, Rep. Brian Fitzpatrick from Pennsylvania introduced a bipartisan bill with Rep. John Garamendi from California that would aim to reduce student loan debt by making it easier for graduates to refinance their loans and bolster the student loan forgiveness program for public workers. “Now more than ever, we need people entering the public service professions,” Fitzpatrick told NPR. “We need school teachers, we need social workers, people in the military, we need to encourage our students to enter these professions… I think it’s a great investment in our country.”
But for the researchers at the Levy Institute, debt reform does not go far enough to minimize the harm of student loan debt. In fact, the expectation of student loan forgiveness, they argue, incentivizes students to borrow even more. “In order to avoid problems of moral hazard, any restructuring of student debt — including our debt cancellation proposal — should be accompanied by strong and appropriate policies that enforce the consequences of borrowing and address the market failures that lead to undesirable social costs,” they write. They recommend not only total cancellation of student loan debt but the establishment of publicly funded, debt-free education.
In the past, the idea of tuition and debt abolition seemed quaint, relegated to the realm of renegade citizen initiatives like the Rolling Jubilee, a collective originating from the Occupy Wall Street movement that purchases debt from banks for pennies on the dollar and then erases it. But the concept is gaining some traction among legislators in different parts of the country. In May 2017, Tennessee became the first state in the country to offer free community college to all adults. Voters in California are mobilizing for a ballot initiative that proposes a plan for debt-free schooling. This new act — called California College for All — would ostensibly produce $4 billion to fund public education through the reinstatement of an estate tax on millionaires and billionaires. It’s a notion that remains pretty radical, even among Democrats.
But, of course, the last guy who ran on a presidential platform that promoted free higher education didn’t get too far doing it.