During the 2020 presidential primaries, Democratic candidates proposed forgiving $640 billion in outstanding federal student-loan debt. Proponents of loan forgiveness argue that this debt places overwhelming burdens on today's young graduates-and college dropouts-and that lightening their load would help both the borrowers and the economy overall. Yet these proposals have raised questions about who would benefit most and whether student-debt relief is efficient. Is loan forgiveness for all a good idea? Beth Akers is a senior fellow at the Manhattan Institute for Policy Research, a center-right think tank. Sandy Baum is a nonresident senior fellow for the Center on Education Data and Policy at the Urban Institute, which leans toward the center-left. In this forum, both authors argue against universal loan forgiveness.
IN 2011, when the Occupy Wall Street movement called the nation's attention to the wealth-and-income gaps between the top 1 percent of the population and everyone else, activists began to promote the idea of forgiving student-loan debt. Those in the Occupy Student Debt campaign argued that all current education debt should be eliminated immediately. They asserted that policies such as limiting loan payments to an affordable share of income were "micro-cosmetic," and that creditors needed to free debtors from their "bondage."
At the time, only a small minority of people subscribed to the idea, but recently it has gone mainstream, with Democratic presidential candidates Elizabeth Warren and Bernie Sanders proposing broad student-debt forgiveness policies. To help families cope with financial pressures during the Covid-19 crisis, the Democratic Party platform calls for up to $10,000 in student-debt relief per borrower. Longer-term provisions in the platform include forgiving all debt on undergraduate tuition loans for those who earn under $125,000 and who attended public institutions. That benefit would also apply to those who hold tuition debt from attending historically Black private colleges and universities.
Democrats included a student-debt relief provision in their proposals for the Covid-19 rescue package. Ultimately, the Coronavirus Aid, Relief, and Economic Security Act of March 2020 suspended loan payments and waived interest for six months but did not include debt forgiveness. The payment waiver now extends to the end of the year.
Proponents of large-scale erasure of education debt characterize the idea as progressive, in part because such a policy, which would benefit relatively affluent people, might be financed (as Bernie Sanders proposed) by people who are even better off. Truly progressive policies, though, provide disproportionate benefits to households in the lower reaches of the income distribution. They are designed to diminish the gaps between the haves and the have-nots.
The realities of student debt in our country make it clear that proposals to eliminate these obligations do not meet the criteria for progressive policies. Households in the upper half of the income distribution hold more student debt than those in the lower half. The highest-income quartile of households owes about one-third of that debt; the lowest-income quartile owes about 12 percent. People who don't go to college don't have student debt. They have lower incomes...