BOHANON & CUROTT: Forgive us for not supporting mass forgiveness of student loans
President-elect Joe Biden has signaled his willingness to work with the next Congress to provide some form of relief for college debtors. While there are many arguments in favor of canceling the college loan, the one we find the least compelling and the most curious is that it is a matter of social justice. Most self-identified advocates of social justice generally view justice as a matter of redistributing income, wealth or opportunity from the wealthy to the less fortunate.
However, the lifetime earnings of college graduates are estimated, on average, to be over $ 400,000 more than those of high school graduates. This benefit is shared by those who graduate with student debt. In 2016, over 63% of all student debt was held by those in the top half of the income distribution. Even the most indebted university graduates can seldom be classified as “less fortunate”.
Another point of view on justice is equal treatment of equals. An Iowa factory worker saved, scrimped and worked overtime so his daughter could go to college. She graduated without any debt. A better-paid worker at the same factory bought a boat and refused overtime while his daughter took out student loans. Earlier this year, the first factory worker asked then-presidential candidate Elizabeth Warren if her student loan forgiveness program would pay off her family. Warren said no, and the father said, “So we did the right thing, and got screwed?” A little strong? May be. But he scores a point. The ant is said to come out better than the grasshopper.
Adam Smith, father of modern economics, had a lot to say about justice in his Theory of Moral Sentiments. He argued that the rules of justice were rigid and precise and “admit of no exceptions or modifications”. Interestingly, his first principle example: “If I owe a man 10 pounds, justice demands that I pay him precisely 10 pounds.”
A recent BSU graduate we know left college debt-free. He worked throughout his academic career and his family contributed to a tax preferential 529 account. He is grateful for his debt-free status and reluctant to condemn all cases of college debt forgiveness. But he agrees with Smith’s general principle. In the words of our graduate, “If you take a loan, you should be required to. We agree on both points. Justice may require loan forgiveness in some cases, but general loan forgiveness seems both stupid and unfair to us.
Bohanon and Curott are professors of economics at Ball State University. Send your comments to [email protected]