The Truth About Student Loan Forgiveness – AMAC

AMAC Exclusive – By Andrew Abbott

Joe Biden meets with White House staff on Monday July 12, 2021 to discuss student debt.

While the left has portrayed the cancellation of student debt as a benefit to working and middle-class Americans, evidence suggests that it is, in fact, those people – many of whom did not go to college precisely because they wanted to avoid the burden of student debt – who will foot the bill, while those who took out the loans – many of whom come from wealthy families and enjoy comfortable lifestyles – will benefit the most. At the same time, simply canceling student debt would do little to address the structural problems in higher education that precipitated the student loan crisis.

Late last month, Senator Elizabeth Warren wrote a New York Times editorial imploring his party to take a big step now or face calamity in November. “To put it bluntly,” she wrote, “if we fail to use the remaining months before the election to further deliver on our agenda, the Democrats are heading for big midterm losses.”

Among his long list of potential actions was “cancelling student loan debt.” On the campaign trail in 2020, Biden promised borrowers he would “eliminate your student debt,” but declined to outline any kind of plan to do so. Once Biden took office, however, he quickly qualified that promise, with the White House hinting that it might be open to canceling $10,000 in student debt per borrower.

But while progressive leaders insist it’s something Biden can do with the stroke of a pen, via executive order, the president has dithered, calling on Congress to pass legislation to deal with the crisis. student debt. Biden perhaps recognizes the disastrous effects of his other massive spending policies and does not want to be solely responsible for the inevitable rise in inflation that blanket student loan debt cancellation would drive.

The $10,000 student loan forgiveness model pushed by the White House is estimated to cost taxpayers up to $2.4 billion — most of which would be paid for by Americans who didn’t go to school. university. If Progressives won their battle and forced Biden to increase the dollar amount to $50,000 per borrower and remove income restrictions, it would cost $321 billion.

But whether the White House cancels all or nothing of the student debt currently held by Americans, it will do nothing for the students currently in school and do nothing to address the root of the problem – the rapidly rising cost from a college. education. Over the past 20 years, the average cost of tuition has increased by more than 180%, exponentially outpacing inflation or other cost-of-living adjustments – a very important fact that progressives conveniently ignore.

With such a spike, one would assume that the product (a college degree) also increased in value. Yet, by almost any measure, the opposite has happened. Recent data clearly shows that the expected increase in income and wealth from a college degree is in steep decline. In 2011, two university professors monitored the studies of more than 2,000 undergraduate students. They found that nearly half “demonstrated no significant improvement in a range of skills – including critical thinking, complex reasoning and writing – during their first two years at college.” Similar studies also found that in many cases, four-year college graduates performed worse in general knowledge than high school graduates.

So where are these cost increases coming from? The overwhelming majority of staggering tuition is spent on administrative staff, college amenities, larger buildings, and increased faculty salaries. Recently, Louisiana State University’s $85 million gym renovation included the creation of a giant water park-style “lazy river” in the shape of an “LSU.” More than a dozen major colleges have installed similar water park features in their schools for over $10 million per project. The effect of a water park on the quality of education a student receives is not particularly clear.

But all these examples raise a central question. Why raise prices so aggressively if money can be spent so frivolously without need? For decades, individuals paid for their education by joining the military, taking out personal loans from local banks, or simply saving up. Starting in the 1960s, the federal government began to subsidize these loans. This led to the creation of the Student Loan Marketing Association (Sallie Mae), a semi-private government agency that would provide and manage government student loans.

In the late 1990s, Sallie Mae launched an aggressive campaign to pressure students into taking out more higher-interest loans than they needed, often with explicit college support. In some cases, colleges were actively placing “Sallie Mae employees in college call centers to answer questions from students who thought they were getting advice from college loan officers.” As colleges increased their tuition fees, the government offered more lavish government grants that only further inflated the market. This, combined with the collapse of the manufacturing industry, meant that prospective students believed college was the only chance for a financially successful future and were willing to sign anything.

Yet, as a former Sallie Mae employee would reveal after retiring from the industry, “our client was almost as much the university as the student.” For the government-backed student loan industry, it was as much about making money for colleges as it was about providing student loans. As the for-profit student loan industry has come under greater scrutiny and Sallie Mae has left the student loan industry, high tuition rates are now being maintained and exacerbated by colleges and universities. universities themselves.

Last year, for example, it was revealed that Columbia University had hired a marketing firm to actively recruit college graduates for a prestigious Master of Fine Arts in Film Studies. The school promised its students that this prestigious Ivy League degree was a golden ticket to the film industry. Graduates of the program walk away with $181,000 in student debt. But despite the “prestigious” degree, barely a handful of graduates worked in the film industry and half earned less than $30,000 a year. While students undoubtedly make ill-informed decisions about their education, the entire higher education system is set up to keep young people and their parents in the dark about the true risk-reward analysis of contracting massive loans to attend university.

When the state of higher education in the United States is considered as a whole, it quickly becomes clear that the student debt crisis is only a symptom of a much larger problem inherent in the system itself. . Far from being a permanent solution, canceling student loans would provide only temporary, short-term relief to borrowers while subjecting them and their children to the long-term economic consequences of such decision – not to mention the moral hazard of setting a precedent that the government will simply forgive your debt if you take more than you can pay. So Democrats may soon discover that this last ditch attempt to salvage their majorities may also backfire and exacerbate the economic crises they have already caused.

Andrew Abbott is the pseudonym of a writer and public affairs consultant with more than a decade of experience in DC at the intersection of politics and culture.

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