The student debt that plagues millennials has created a public policy problem like no other. With total debt having exploded to $1.6 trillion owed by 43 million Americans, it’s the economic equivalent of an iceberg where the real danger lies lurking below the surface. This mountain of debt has the potential to sink the Titanic of the US economy. In fact, he was a silent contributor to the gradual inflation that pushed up consumer prices. The now 30-month moratorium on the repayment of student loans has injected tens of billions of dollars into the budgets of families who were spending them on consumption they previously postponed. There’s nothing inherently wrong with that.
With the onset of COVID-19 and job-restricting business closures, it even made some sense but, like most hasty decisions, it generated bizarre consequences rewarding most of those who need it least. help. This moratorium is expected to be extended after the November election, just as the Trump White House did in 2020. A resumption of loan repayments would disrupt, if not enrage, a significant electoral bloc. These bipartisan delays reflect a rough political game – wisdom and ideology be damned.
The United States Department of Education’s College Scorecard reveals that a teacher earning a median starting salary of $38,448 receives $264 a month in debt relief for a total of nearly $8,000. A pharmacy grad, who earns $130,000 on average, saves $3,226 a month for a total of $98,880 — more than enough to accumulate a down payment toward a first home. As Andrew Gillen of the Texas Public Policy Foundation observes, “…the pause in student loan repayment is perversely aimed at providing welfare to the rich or future rich.” Worse still, the non-professional college graduate has almost certainly factored their modest pay rise into their regular expenses and will find themselves severely pinched once payments resume.
Although Joe Biden promised student loan relief during his 2020 campaign, it has become clear that paying off tens of thousands of dollars or more in debt is unpopular, with the unschooled majority having to subsidize such a windfall – comforting those which are already economically better. stopped. Blue-collar voters are another important electoral bloc that is better not to stir up. As Colorado’s Michael Bennet noted during a recent Senate campaign appearance, working-class Coloradians “…don’t need another brick to bear.” So how did we get to this mess where even the Obamas ended up paying off student loans into their 50s?
Since 1962, college spending has increased 800% to 900% on average in terms of inflation-adjusted dollars, or 12% to 15% per year. I vividly remember my bill for room and board, books, health insurance, and tuition totaling $993 in the fall of 1963 at the University of Maryland. The four hours I worked daily in a $1.25 minimum wage sub-store provided money for beer and gasoline at 21 cents a gallon. If you could land a decent summer job, it was actually possible to work your way up to college. In adjusted dollars, the total cost was approximately $9,000 per year. There were no federal loan programs because there was no need. Today, tuition at the University of Colorado has reached $13,000 per year. Add an additional $16,000 for on-campus room and board and $1,200 for books — presto, you’re talking about $30,000.
If you have more than one college student, even Republicans have to swallow the rising costs hard. Loans are needed. Several economists offer compelling arguments that the easy availability of federal loans has actually fueled the costs of higher education. It is fine to specify that the students are legally of age. Let’s be honest: 18- and 19-year-old students aren’t capable of fiscal sobriety, let alone wisdom. Student loans have been used to fund divorce lawyers, custody battles and new cars.
Obamacare’s permission for parents to keep their children under family medical insurance until they turn 26 has allowed schools to turn health services into another profit center. My twin brother taught math for 34 years at the University of South Carolina. He showed me their new gym facility ten years ago which tops the best private gym I have ever seen. He explained, “We compete with Duke and Miami for students, so we have to offer four-star amenities.” Oh good?
We might need some fresh thinking on student loans. My son-in-law offers an intriguing approach. Since Congress guarantees existing loans, consolidate all remaining debt into one federal plan with minimal service charges. Second, the excess interest of credit borrowers already paid into private plans relative to their outstanding principal, thereby reducing the debt balances of those who are integrated into high-interest plans. Avoid offering blanket debt forgiveness. Students must pay what they owe. Seems fair to those who have repaid or are continuing to pay despite a moratorium in place.
Miller Hudson is a public affairs consultant and former Colorado legislator.