The Case Against The Student Loan Forgiveness Act of 2012

The Case Against The Student Loan Forgiveness Act of 2012

When the Occupy Movement began, student loan forgiveness was a common theme. You would see a lot of people holding signs demanding their loans be forgiven. I did not take it seriously. I did not think people would take it seriously. Sure, it would be nice if loans were forgiven, but that is not going to actually happen, and it is selfish and ironically absurd for people protesting bailouts to ask for a bailout at the same time. To my chagrin, I was proved wrong. The movement for student loan forgiveness has gained a lot of traction, it is now a bill in congress, and has hundreds of thousands of signatures in support. Therefore, I will address the issue. A one-sentence summary of my opinion of student loan forgiveness is this: It is disgusting, grossly immoral, and economically disadvantageous.

What the Bill does:

The SLFA would forgive student debt if they have paid 10% of their discretionary income for 10 years towards their student debt. Furthermore, the bill would cap interest rates on federal student loans at 3.4%. People who go into certain areas of public service would be eligible to have their debt forgiven in 5 years. The bill was introduced by Rep. Hansen Clarke, a Michigan Democrat. He was spurred to action after seeing so many young people suffering from huge school debt and with little job opportunity. An online bill has received over 650,000 signatures in support of the bill as of April 18, 2012.

Sponsors of the SLFA note that since 1980, average tuition for a 4-year college education has increased by 827%.

Moral argument against the Student Loan Forgiveness Act:

The Student Loan Forgiveness Act (SLFA) is immoral. The first reason it is immoral is because it proposes to forgive a debt paid for by the taxpayers that a person knowingly entered into. Students were not duped or forced to go to college. They chose to go to college; they had a wide choice of colleges or higher education institutions to attend, and made a choice based on what they wanted.

Student debt is not akin to slavery. Slaves did not have a choice, real or fake, in their dealings with their master. They were a non-consenting party to a relationship forced upon them. A student chooses to enter into the college and pay the tuition back. The college chooses to accept the student to attend their institution. It is a contract entered into by both parties.

It is immoral to allow these people who have chosen to accept debt to make themselves more valuable as an employee, or maybe simply to have a good time in college, to be released of their debt at the taxpayers’ expense.

In case you do not understand how forgiving a student’s federal loans is a cost to the taxpayers, here is the explanation. When the government forgives your debt, it assumes more liability. This liability must be paid for. It can be paid for by borrowing money, i.e. debt. Debt is often bought by the US treasury or foreign governments like Japan and China. It can be paid for by raising revenue, i.e. increasing taxes to pay for the cost. Lastly, the increased liability can be paid for by printing more money, i.e. inflation. Inflation reduces the value of every dollar of every individual, and is an unconstitutional tax which is impact those with the least the most.

Furthermore, the SLFA is immoral because people with student debt are not the most deserving of debt forgiveness. I am sure you have heard the common saying that a person with a college degree will earn over a million more than a person without a degree over their lifetime (this is a deceitful statistic by the way and I feel ashamed using it but the point is still there, people with a college degree earn more than those without one). Should students with a degree, sometimes students with a graduate degree or even a law degree, be receiving a bailout? When there are people who can barely afford to get by with no high school diploma because their family was too poor to live in a zip code with a half decent school system, should college degree holders be receiving loan forgiveness. Does the person who chose their degree at a college also of their choosing deserve their choice be paid for others when there are people barely making it on food stamps.

I know a kid. He did not have his family supporting him. He worked his ass off in school, got good grades, and chose a degree in computer information systems, something he did not love, but something he knew he knew was a marketable degree. I know another person who chose to go to community college, studied hard until he got scholarship to go to a 4-year college, where he will soon be graduating with a business degree. People make choices in life. If you chose to major in philosophy because it called to you and you’re now a barista at Starbucks, I do not think you have a moral argument to demand your neighbor to pay for that education. If you wanted to be a teacher, and chose to go to Boston University because of the prestige and beautiful campus, or to Salve Regina, so you could live in a mansion on the sea your senior year, do you have a moral argument to demand someone else pay for that experience. Should the person who worked throughout school and went to a state school to save money pay for their experience? No. No they should not. No, there is not a moral argument for that.

People make choices in life. Some people painted houses, studied hard, chose a cheaper school, and chose a marketable degree; others lived the life, partied, got a degree in what interested them, and went to the expensive school with the prestige and pretty campus. It is immoral to ask to have the tab for that experience picked up by those who missed that experience.

Economic argument against the Student Loan Forgiveness Act:

“There is no such thing as a free lunch.”

Milton Friedman

Higher education is expensive. The cost of higher education has exploded upwards as of late. It was much easier for your parent to have gone to college and paid for it than it is for you or me. This higher education bubble is akin to the bubble in medical care or the housing market (which recently popped). In all these bubbles, the free market is not left alone. Healthcare is a regulatory mess devoid of free market pricing mechanisms; the housing market was fueled by Fannie Mae and Freddie Mac providing money to banks to basically give a house to any person who expressed interest. Education is similarly subsidized by low interest rate federal loans and other programs and grants. College has further become an artificial minimum education level to obtain many jobs which in all honesty do not require a degree. For these reasons, there has been a rise in investment in college, and because the government subsidizes it, there is a rise in cost.

The unintended consequence of the SLFA will be that the price of higher education increases even more. If the schools know the government will pay the price for the school after 10 years of minimum payments, then it is going to raise the price! Whenever the government gets involved, the prices go up. Whether it is healthcare, housing market, or higher education after the introduction of federally subsidized loans. This Act will INCREASE the cost of school.

By further subsidizing college education, by lowering the interest rate on federal loans and forgiving debt after 10 years of minimum payments, the malinvestment, the distortive demand for higher education, will exacerbate and the price will increase. This will render scholarships based on need less effective because the cost will have increased. This will make it more expensive for people to get a college degree.

Counter to argument that higher education should be accessible to all, not just the rich:

Argument: College has become so prohibitively expensive that young people not from rich families are not able to afford to go whereas the children of the rich are able to attend the most prestigious schools in the country. This will further separate the haves from the have nots. This goes against the very tenets this country was built upon, that “all men are created equal” as Jefferson proposed in the Declaration of Independence and as the Constitution protects through the Equal Protection Clause of the 14th Amendment (note: honestly attempted to not make straw man argument here).

Counter: This is a legitimate concern. We do want all people, if they so choose, to have access to higher education. We do not want higher education the sole province of those of privilege. But the goal enunciated in this proposition is not forwarded by the SLFA. Loan forgiveness will most benefit those who are well off or are soon to be well off, i.e. those with a higher education degree. It will make school more expensive for everyone. To ensure higher education remains available to people coming from a little or a lot requires the government to stop raising the cost by providing assistance to all. A possible alternative would be to provide assistance only to those from poorer socio-economic backgrounds. That would answer this argument. But, in my opinion, the best solution is to ensure that government subsidies do not increase the cost of higher education so much that state schools and community colleges become inaccessible.

Conclusion:

I am a student. I plan on one day being wealthy. I work towards that goal. I will graduate from law school with over $150,000 in loans. The majority of those loans will be federal loans. I would benefit tremendously from this Act. Perhaps a part of me secretly wants this act to be passed. If it were passed I would take advantage of it, just as I am now taking advantage of federal loans. However, sometimes you must do what is right, not what is in your personal benefit. Asking others to pay for my school loans is immoral and wrong. I willingly chose to get a degree in politics (and I loved philosophy and may have got a degree in that if it were offered at my undergraduate), I willingly chose to go to law school, knowing the risks and rewards. I made the choice and I will live with it no matter the outcome. To support the SLFA is to socialize my debt yet keep my gains as a future attorney private. In other words, it is to ask of others to pay for my degree yet keep the rewards of that degree for myself. I will not do that, and so I do not support this the SLFA.

Wall Street executives made unimaginable money leading up to the stock market crash and financial crisis of 2008. They were swimming in money. When the shit hit the fan, those who were under water in housing mortgages, those who were duped by the system, did not get bailed out; the wall street executives were the ones who benefitted by being bailed out. Now we have the hypothetical situation of a student with a degree from a college standing next to a poor fellow working a minimum wage job, working on his G.E.D., and with credit card debt. The poor fellow watches the student hold a sign asking for their college degree to be forgiven. The Wall Street executive is a looter, a person who takes from the people through the force of the government, and as students protest them through the Occupy Movement they simultaneously ask for the same.

Student Loan Forgiveness, and the further subsidization of higher education is immoral, economically disadvantageous, and against the American grain of person responsibility. Oppose it because it is the right thing to do.

Let’s have people pay for their own decisions. Let’s stop asking others to pay for our years in college. Let’s keep higher education affordable. Let’s not support the Student Loan Forgiveness Act.