Putting the Student Loan Program into Perspective

For the past several years, there have been programs in place to mitigate the financial burden of student loan repayments. President Trump initially suspended student loan repayments during COVID-19 pandemic and that policy has been extended. Recently, President Biden recently announced a wide-ranging student loan forgiveness program thru an Executive Order. He stated, “In keeping with my campaign promise, my Administration is announcing a plan to give working and middle class families breathing room as they prepare to resume federal student loan payments in January 202.”  Depending on the type of loan, up to $20,000 of federal student loan debt would be forgiven. As many as 43 million borrowers will qualify for some amount of forgiveness.

This program is attached to the American Rescue Plan Act, a $1.9 billion bill the Democrats rammed through Congress on a party-line vote. It was initially sold as an “emergency measure” to help address the economic impact of the Pandemic acts has now become an Administration “slush fund.”. “Much like the Inflation Reduction Act had little to do with fighting inflation, the American Rescue Plan appears to be more about rescuing the Democratic Party from their disastrous policies…” Regardless of the sins of its genesis, the debt forgiveness program has become controversial.

In some respects, the program is a slap in the face to hard working Americans who saved enough to send their children to college or worse yet, for those who worked their way through school holding down a job in addition to an academic load. The plan does not compensate those who “did the right thing.” The Administration’s argument that such people are mostly in the upper class (who could afford to save) appears specious. With its relatively high caps on the income test ($125,000 single/$25,000/family), it is likely that many individuals with high potential income (e.g., lawyers currently working as clerks) will also be the recipients of the government’s largess.

The travesty is that we are creating a significant disincentive to “good behavior” in the future. Government policies have tendency to linger on well after their original purpose has expired. Why would future students actually “pay” for their education if there is a chance they can get it for “free?” Will a future Congress have the spine to counter an argument like, “You did it before for people like me, why are you prejudice against us?” Since they are effectively using government expenditures to “buy votes,” why resist? This is partisan politics at its finest.

It is also spending money we don’t have. However, it is a bit disingenuous to say that we will have to repay this bill with higher taxes (the cost is estimated to be $2,500 per taxpayer). Given the massive (and constantly increasing) federal debt, it is not credible to think that “anyone” will really be paying this back. More likely, is the probability that the massive debt we are accruing will ultimately cause investors to “lose confidence” in the government’s ability to pay its obligations (current public debt is over $30 trillion and interest payments exceed $400 billion annually). The real risk is the adverse impact of a massive economic downturn in the future.

Currently, there is a serious situation because college graduates are unable to find employment with wages sufficient to “live” and repay their student loan debt simultaneously. I witnessed a personal case where a young man with a general business degree could only find work as a bank teller. This is a fine job, but it doesn’t require a college degree and the pay is certainly not commensurate with the cost of his education. While anecdotal, it does exemplify the problem many young college graduates face. Certainly, forgiving their debt would likely give them a better chance for a brighter future.

This highlights a foundational problem in our society. Why are our institutions of higher learning failing to prepare their graduates for the real world? What is the worth of a degree that relegates the recipient to what amounts to “slave labor” while they are paying back their student debt? Perhaps the problem rests with our educational system rather that with the Pandemic or the current economic conditions. This problem has been building for years.

Have we sold our children a bill of goods, “If you have a college degree (of any type) you will get a good job and make more than if you don’t.” If the implication is focused on a 4-year undergraduate degree, the statement is substantially disconnected from the truth. First, many degrees do not provide a direct pathway to enhanced employment opportunities. In addition, there are numerous skilled trades that lead to a comfortable living (and likely have better employment security and less stress than many “white collar” jobs). Yet, for decades our culture has eschewed those who “work with their hands.” We have mentally devalued the jobs that run our economy and which provide an opportunity for individual advancement. That must change!

Thankfully, our region has recognized the shortfall, and for years has been working to build a job-ready workforce. Northeast State Community College recently hosted a open houses at the new Technical Education Center and the Aviation Technology program. These follow on to the training and apprenticeship programs at the Regional Center for Advanced Technology. D.R. Horton Homes and the College recently announced a partnership to create a workforce program to develop construction trade skills and support small business.

In addition, regional K-12 school systems have shown a renewed focus on workforce development. A TCAT technical training center is being installed on the former North High School campus. Another notable program is the integration of BioBuilder (a curriculum that introduces synthetic biology) into regional high school STEM programs.

What does all this have to do with student loan forgiveness? It presents an alternative path. Perhaps, rather than looking backwards (forgiving loans for past activity), we should apply the potential $1 trillion dollars the program could coast to improving our future education systems to ensure the next generation will be better off than today.