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Opinion: Got student debt? Why Biden’s plan won’t solve the problem

Across-the-board loan forgiveness would mostly benefit rich people while ignoring the root problem: enormous higher education costs

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Graduates line up before the start of the Bergen Community College commencement at MetLife Stadium in East Rutherford, N.J.

Graduates line up before the start of the Bergen Community College commencement at MetLife Stadium in East Rutherford, N.J., on May 17, 2018.

Seth Wenig, Associated Press

If you were to guess which major political party supports putting more money into the pockets of wealthy Americans, which would it be? 

It’s a trick question. The real answer is both of them do, only in different ways.

Republicans tend to help the rich by adjusting tax rates in the cause of spurring economic activity. Democrats, meanwhile, might be about to help the rich by forgiving student loans. 

The Biden administration has been vague on details, although reports say the president is looking to forgive up to $10,000 in federal student loan debt for those earning less than $150,000 a year. 

How many people do you know earning $149,999 who are struggling with student debt?

Republicans tend to oppose any loan forgiveness, for a variety of reasons, not the least being that it would pump more money into an economy already reeling from inflation

Utahns tend to agree. The latest poll by the Deseret News and the Hinckley Institute of Politics found 46% opposed to any loan cancellation, with the rest of respondents more or less equally divided over other options. The next highest percentage, 17%, supported forgiveness for low-income borrowers only. 

But both parties are missing the point. The real issue with loan forgiveness is that it does nothing to address the root problem, which is the high cost of higher education. The president may forgive loans in the next few days, but when new students enter colleges in September, they will need new loans to cover tuition and other expenses, and the problem will continue.

In a recent essay published by The Atlantic, Republican Nebraska Sen. Ben Sasse, a former university president, offered several intriguing ideas for fixing the cost problem. Among many other things, he suggests charging varying tuition rates based on the chosen field of study. Those who pursue careers with lower paying jobs would pay less than engineering students, for instance.

“Different majors generate widely divergent labor-market outcomes, and so provide varied returns on students’ investment of money and time,” he wrote. Why would everyone pay the same rate?

This idea might have the added benefit of attracting more people to the teaching profession.

He also would do away with current accreditation practices and make schools more accountable for how well their graduates perform in the workplace. 

The nation needs a system that transforms “more lives by offering more accountability, more experimentation, more institutional diversity, more intellectual curiosity, more adaptive learning, and more degrees and certifications. We need a rethink, renewal, and expansion — tinkering around the edges won’t cut it,” he wrote.

On the subject of loans, he said, about a third of them are held by the wealthiest 20% of households. 

“The fact is, the typical student-debt holder is more likely to be white, is more educated, and has more earning potential than the median American.”

Writing for the Brookings Institution, Adam Looney, executive director, of the Marriner S. Eccles Institute at the University of Utah, echoed some of those worries. He supports loan forgiveness, but only if it is done in a way that targets low-income borrowers. He notes the president campaigned on providing an income-driven repayment system supported by expanded Pell grants, which could “redress failures of the current system” and make college financing fairer and more equitable.

“Forgiving debt of affluent, high-income, well-educated, mostly white Americans makes society more unequal, not less,” he wrote.

Meanwhile, if you’re worried about the federal debt (and you should be), loan forgiveness won’t help. 

The last thing we should do is blatantly add to that problem. The Committee for a Responsible Federal Budget estimates it would cost $245 billion to forgive up to $10,000 in loans. The Congressional Budget Office, meanwhile, just released a report that paints a grim future for the economy as spending continues to outpace revenue, and that’s before figuring in loan forgiveness.

No one can seriously argue that people with college degrees aren’t among the wealthiest Americans. Studies that support this are numerous and convincing. 

At the same time, no one can credibly argue that the ability to repay a loan doesn’t differ according to a person’s chosen field of study, or whether they dropped out before obtaining a degree. 

An across-the-board loan forgiveness plan would ignore all of this as well as the need for reforms in higher education. It may be a great election-year policy, but it would help a lot of rich people while doing nothing to solve the reasons students need loans in the first place.