Sunday 19 January 2020

There Is No Such Thing As Student Loan ‘Cancellation.’ Someone Still Has To Foot The Bill.

This week, Elizabeth Warren unveiled a plan to “cancel” billions of dollars worth of student loans without involving Congress. She believes a legal loophole may allow her to erase the debt with the stroke of her pen, no questions asked.
The most obvious problem with exploiting this loophole is that it probably doesn’t actually exist. The next most obvious problem is that this would represent a seismic expansion of executive power, which would be ironic given all of the concern among Democrats that Trump wants to be a dictator.
But there are two even larger and more fundamental issues with any plan to cancel student loans. First,  there is no such thing as “canceling” student loans. What various Democratic candidates have proposed are plans to transfer, not cancel, the outstanding debt of millions of college graduates. They wish to remove the burden of the loans from the people who agreed to the loans and have received their degrees in exchange for it, and place that burden on the shoulders of people who did not agree to the loan and did not receive anything in exchange for it. Student debt will still be paid; we would just be taking the funds from someone else’s pocket. 
Even under Warren’s magic wand proposal, the debt will still certainly land at someone’s doorstep and become their problem. If you think the federal government would ever in a million years choose, out of the kindness of its heart, to simply eat a $1.5 trillion dollar loss without recouping the funds elsewhere, I’ve got an invisible unicorn to sell you. The taxpayers will be footing the bill, one way or another. Of that much we can be sure.
The more feasible plans would supposedly see the loans transferred from college graduates to the dreaded “ultra rich.” I’ve got another unicorn to sell if you think the government is going to recover that full amount solely from billionaire CEOs. Anyone who has been paying attention knows that an initiative of this scope and size will inevitably involve tax hikes on everyone, no matter what they tell us now. But even putting that aside, rich people are still people, last I checked. We still have to deal, ethically, with the fact that we’d be requiring private citizens to pay back loans they didn’t take out, for a product they didn’t purchase. Defend that morally dubious model all you want, but don’t call it cancellation or forgiveness. Nothing at all is being forgiven. We are just forcing someone else to do the atoning.

The second major problem with this debt transfer strategy is that it bails out the people who need it, and probably deserve it, the least. There is over a trillion dollars of outstanding student debt in this country, which we are told is a crisis. But that means the over a trillion dollars of outstanding car loan debt is also a crisis. And the over a trillion dollars of outstanding credit card debt is its own crisis. And the $8 trillion or so of outstanding mortgage debt is the biggest crisis of all. The only difference between college debt on the one hand, and car, credit card, and house debt on the other, is that the former mainly belongs to the upper class, whereas the latter is shared by everyone, including the working class. 
So if there is a magic wand to wave here, why not wave it in the direction of poorer people; people of lesser means and with a lower income potential? College graduates are suffering? Well, so are blue-collar workers. Absolving college graduates their debts would free up funds that could then be injected back into the economy? Well the exact same argument could be made for car, credit card, and house debt. What we are talking about here, either way, is a massive (additional) welfare program. Why in the world should we create something like that for upper-class college graduates who need it far less than everyone below them on the economic and social ladder?
It seems there are only two potential responses here. One is to throw open the floodgates and call for the  absolution of all debt — student, car, credit card, house, everything. But most reasonable people can see how absurd and unworkable this is. The government cannot, and clearly should not, unilaterally abolish all financial commitments made by all 330 million of its citizens.
The second response is to maintain that this student loan “cancellation” thing is a special, isolated, one-time event. But then you are back to having to explain why college graduates, of all people, should be the beneficiaries of this forgiveness bonanza. I don’t think there’s any morally and economically intelligible argument to be made in favor of that.
Of course, there is always the third option, which is the one I support. We forgive nobody’s debt. Not mine. Not yours. Not anybody’s. Every adult is expected to settle their debts and live with their choices. And in the future, to stop the bleeding, we start encouraging better choices. Don’t buy a car you can’t afford, or a house you can’t afford, or a college degree you can’t afford and don’t need. Indeed, most of the people currently in college, and most who have graduated, don’t really need a college education. The “need” in the workforce is largely artificial. Employers require a degree, or prefer one, just because it’s an easy way to thin the herd of applicants. The degree is nothing more than a symbolic certificate supposedly attesting to someone’s general competence, intelligence, and reliability. Except that a degree doesn’t at all indicate that a person has any of those qualities. You can be an exceptionally dumb and lazy person and still graduate college. Just as you can be intelligent and hardworking and never go to college. 
The only solution — the only real solution — is to recognize this fact. Fewer people should be going to college. Fewer employers should be requiring degrees. College has a specific purpose, and it’s not a purpose that necessarily applies to most people. Another name for this solution is “sanity.” We can restore some sanity. But if we are unwilling to do that, if we insist on insanity and unreason, then there is no solution, and nothing will get better, and everybody will lose. It’s up to us which we way go.

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