OPINION:
The 31st president of the United States, Herbert Hoover, once said, “Blessed are the young, for they shall inherit the national debt.” Hoover experienced a significant economic downturn — the Great Depression — which began during the first year of his presidency. Unlike his successor, President Franklin D. Roosevelt, Hoover “strongly condemned programs that put the government into debt.”
Unfortunately, Roosevelt succeeded Hoover and his ominous quote is more relevant than ever. The current debt of the United States is more than $30.3 trillion, which amounts to $91,157 per person.
Yet, Congress wants to substantially increase this debt with various student loan “solutions” that would either pay off student loan debt entirely or forgive a portion of that debt.
The various proposals aren’t cheap and will add to the growing national debt. Should the feds decide to forgive all federal loans, taxpayers would be on the hook for $1.6 trillion. The“moderate” plan to forgive up to $50,000 would cost about $1 trillion. Finally, President Biden’s proposal to forgive up to $10,000 is estimated to cost taxpayers $373 billion.
Article I of the U.S. Constitution gives Congress the authority to raise revenue and taxes “shall be uniform throughout the United States.” Specifically, forgiving student loan debt does not take into account those who have no debt, nor those who have paid off their debt. Further, it does nothing to address the deeper issues with student loans and the cost of education.
More Americans 25 or older have bachelor’s degrees now than 10 years ago. In fact, 27.5% in 2009-10 had these degrees compared to 32.1% in 2015-19. In 2020, among Americans aged 25 to 29 years old, 39% reported a bachelor’s degree or higher and only 9% reported a master’s degree or higher.
Alternatively, 95% reported obtaining a high school diploma and 50% reported having an associate’s degree or higher.
Even though more than two-thirds (67.9% of Americans 25 and older) didn’t have a bachelor’s degree in 2019 (most current number), all taxpayers would be subject to paying off the massive debt related to student loans. In 2021, one higher education expert estimated that the $10,000 cancellation plan would amount to $2,000 in extra taxes for “the average borrower.” The $50,000 plan would amount to $10,000 in extra taxes per taxpayer, or (ironically) in more borrowing.
Not only are these solutions fiscally unsound, none of three major proposals address the real problem.
Paying off student loans (in full or in part) asks American taxpayers to foot more of the bill to pay for outrageous federal education funding programs that have helped increase the costs of college.
In 2010, then-President Barack Obama signed the Health Care and Education Reconciliation Act, which dramatically changed student loan financing. The legislation ended the process of the government backing private banks with subsidies for federally ensured student loans. Instead (beginning in 2014), federal student loans would be administered by the U.S. Department of Education.
In a press release at the time of the 2010 legislation’s passage, Mr. Obama stated that by “ending … wasteful subsidies” an estimated $68 billion would be saved by the federal government for “college affordability and deficit reduction.”
Interestingly, what this change in lending essentially did was make the federal government the largest student loan lender in America. In 2015, a year after the change went into effect and when student loan debt amounted to $1.21 trillion, the federal government became “the largest holder of nonrevolving consumer debt, with $932 billion owed to it.”
In 2015, the federal government owned about 70% of student loan debt. In July 2021, the federal government owned 92% of student loans and total outstanding federal student loan debt amounted to $1.61 trillion.
But the federal government taking on student loans hasn’t equated to savings for college students. In the 2010-11 school year, the average annual cost of tuition at a public four-year institution was $8,300. In 2019-20, this cost had increased by 13.3% to $9,400. Private for-profit schools only experienced a tuition increase of 8.2%, from $17,000 in 2010-11 to $19,100 in 2019-20. Among two-year institutions, private for-profit schools experienced a tuition decrease by 3.1% in the same time period, while public two-year institutions’ tuition increased by 18.8%.
Rather than throwing more money at the student loan problem, Congress ought to reform previous legislation and seek out solutions from private institutions that clearly have a better handle at addressing rising costs of college. For all the money going towards college education, it’s a shame that no one — including Congress and young adults — can budget effectively.
• Lindsey Stroud is Director of the Taxpayers Protection Alliance’s Consumer Center.
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