Tomorrow, 04/13/2016 as a part of the Million Student March, students all over the country will take to the streets demanding that all student debts be erased.
While traditional protest is absolutely needed to bring the issue of unsustainable student debt and its evils to the front of the political discourse, total forgiveness is not the best answer.
Student debt is a monumental societal problem. Further, anyone with a calculator and a few basic statistics on the magnitude of the problem can quickly figure out that massive portions of these unsustainable debts will not be paid back. As the adage goes, “debts that can’t be paid back, won’t be paid back.” Without drastic intervention from the federal government, these overhanging Insolvable (and unpaid) debts will cause untold suffering for millions of American families for decades to come.
- What is the most equitable way to determine who has to pay their debts and who doesn’t?
- What is the most beneficial way for society as a whole to reduce these debts?
- What is politically feasible?
- How do we make sure that we stop student debt from re-accumulating?
For the first three of these questions, there is no perfect answer. While total and immediate forgiveness sounds good, vaporizing $1.2 Trillion of owed money is highly unlikely actually to happen and could have significant destabilizing effects to the federal budget and the broader economy.
The best answer for dealing with the already accumulated student debt may already exist in the form of Income-Driven Repayment programs currently available. While the awareness and complexity of these programs are not optimal, the idea that those who can afford to pay should pay and those who cannot afford to pay should have protection against payments they cannot afford is both compassionate and fair. There are certainly adjustments that need to be made to the Income-Driven Repayment programs, but the underlying concept is sound.
- The programs need to be simplified
- End of term loan forgiveness needs to be made tax free
- Creation of a mechanism to apply income-driven repayment to private student loans
- Enlistment of the private sector to drive awareness of, and enrollment in, these programs (The Department of Education granted loan servicing monopolies clearly have not been getting the job done)
Finally, bankruptcy laws must be reformed, so student debt is easier to resolve through the bankruptcy process. Bankruptcy courts are specifically optimized to evaluate what debts are unpayable and constitute unreasonable burdens for individual borrowers—why should student loans be treated differently?
As far as reducing the creation of new student loans, creating an entirely new free higher education system overnight won’t happen. In place of this, federal student aid in all forms should immediately be banned for all for-profit colleges (this is corporate welfare in its purest form), community college programs should be expanded, and deep, mandatory, tuition cuts should be enacted at all state schools to force cost discipline on these programs.