FORBES: Forgive Us Our (Student Loan) Debts?
Career College Central Summary:
Last week, President Obama convened a “Summit on College Opportunity.” The gathering at the White House focused on “supporting colleges to work together to dramatically improve persistence and increase college completion.” For his part, the President lamented that “higher education increasingly feels out of reach.”
True enough. Nationwide, college tuitions have increased 440 percent over the last 25 years—faster than increases in both the Consumer Price Index (the measure of general inflation) and health care costs over the same period. To attempt to pay for these historic price increases, students and their parents have amassed 1.1 trillion dollars in student loan debt, which, for the first time in history, now exceeds total national credit card debt.
Were good intentions sufficient, we might be more confident that the President’s efforts to address the college affordability and student loan debt crises would bear fruit. Instead, one of the key elements in his project to bring down college costs—student loan forgiveness—promises only to exacerbate the problem.
We can see this clearly when we reflect on the unintended consequences of the loan forgiveness plan, according to which graduates with debt are relieved of—“forgiven”—their student loan debt after a certain period of time. To begin, where does this unpaid debt “go” after the federal government has forgiven it? It is transferred to the backs of federal taxpayers. This transfer may not be subsidized through increasing federal taxes—at least not yet—but rather, is likely to go the apparently more politically expedient route of being added to this country’s already 18 trillion dollar national debt. Someday, someone is going to have to pay this down.
Moreover, one of the programs designed to implement Obama’s vision for student loan forgiveness “privileges” (to use a term that’s all the rage these days) those who go on to work for the government or non-profit organizations (the “Public Service Loan Forgiveness” program). Under this plan, debt-carrying graduates employed by the government or a non-profit organization can have their loans forgiven in roughly half the time as occurs under other forgiveness plans. Public Service Loan Forgiveness kicks in after ten years, whereas other forgiveness plans require at least twenty years of payment. Why privilege these graduates over those who enter the private sector? If the official justification is that government and non-profit workers make a “superior” contribution to society, the Administration has yet to make the case for the “inferior contribution” of those in the private sector, whose wealth creation provides the surplus funds that the federal government chooses to redistribute.
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