Yes, we have a student loan debt crisis. And it’s growing. In Missouri, 58 percent of 2017 college graduates had debt when they graduated, and the average amount owed among those with debt was $27,108. Fortunately, creative ideas for getting out of this mess abound. Many of them revolve around more flexible payment schedules, improving the financial literacy of young people, making sure that colleges and universities have some skin in the game, or just making college more affordable.
And while loan forgiveness would provide immediate relief to debt holders, it’s important to make the distinction between debt relief and actual education policy. Loan forgiveness would be a very costly policy that wouldn’t expand access to college. In fact, a recent analysis of the costs and benefits of several forms of “free college” found that only one didn’t create education benefits that exceeded the costs. And that was loan forgiveness. Why? Because in this case, those who qualify have already received their education. The benefit of that education is there whether their loans are forgiven or not. So the benefit stays the same, and the cost goes up.
If a student loan holder truly didn’t understand what they were signing up for, they should have a broad array of repayment options tied to their salary. If they were scammed by a loan processor or for-profit college that was selling snake oil, by all means they should have recourse. But a plan to take one point in time and forgive all debt for all holders, regardless of their occupation, income, or repayment status is being floated in order to make headlines by those who make a living spending other people’s money on other people.
We can do better.