student debt

Bernie’s Student Debt Plan Doesn’t Make Sense. Which Is Fine.

Bern it all, and let the Senate sort it out. Photo: Saul Loeb/AFP/Getty Images

Imagine that you’ve just been accosted by a street-corner socialist (again). He presses a pamphlet into your hand and tells you that his movement has a big, bold idea for rectifying the inequities of late capitalism, and restoring faith in the concept of public goods. You look down at his manifesto. It reads:

The federal government should take $1.6 trillion (or roughly 75 times what it spends each year on welfare for needy families) and:

1) Give it to a disproportionately upper-middle-class subsection of U.S. residents, who collectively make up only about 13 percent of the country’s population.

2) Distribute the $1.6 trillion within that subsection, such that the most privileged individuals tend to receive the biggest government handouts — which is to say, in a manner that provides six-figure checks to many doctors and lawyers, but only a few thousand dollars to the typical working-class “13-percenter.”

You look up and ask, “Wouldn’t that be kind of … regressive?” The socialist rips the pamphlet out of your hand and hisses “neoliberal wonk” over and over, until you walk away in exasperation.

This is how the debate over Bernie Sanders’s new plan to forgive all $1.6 trillion of outstanding U.S. student debt ostensibly feels to some liberals (and perhaps, a few socialists). The generosity of the Vermont senator’s proposal — and its evocation of the precapitalist tradition of debt jubilees — lends it a radical, nigh-utopian aura. And the very real, very needless hardships that America’s monstrous system of higher-ed financing has imposed on a generation of college attendees — and the very real, very needless costs that those hardships impose on our macroeconomy — imbues the concept of a student-debt jubilee with a sense of moral urgency and righteousness.

And yet, it is also the case that forgiving all student debt wouldn’t be especially progressive in its distributional implications, or especially coherent as a means of redressing the harm done by our collective failure to treat higher education as a public good. I’m not sure that these facts matter much, for reasons I’ll get to in a minute. First though, let’s look at what the neoliberal (and socialist) wonks get right.

Student-debt cancellation is not a “universal program.”

The most socially and economically disadvantaged people in the United States do not generally go to college. The most disadvantaged student debtors typically take on lower loan balances than the most privileged ones, whose debt-financed investments in law, business, or medical school often pay huge dividends. For these reasons, indiscriminately erasing all student debt could be regressive in the aggregate, depending on how the program is financed (and/or what alternative forms of spending it displaces from the congressional agenda).

Advocates for a jubilee have (at least) two responses to those who raise such distributional concerns. One is that, even if less privileged college attendees have lower absolute debt loads, they are also more debt-burdened — which is to say, their student-debt burdens are higher, when measured as a percentage of income. This is a vital point. But it does not explain why student forgiveness shouldn’t be targeted or means-tested in some fashion, as it would be in Elizabeth Warren’s proposal.

Another, more prevalent rebuttal emphasizes that higher education should be a universal public good: If you wouldn’t want to means-test library cards or access to kindergarten, you shouldn’t worry about rich people benefiting from the decommodification of higher learning.

Sanders himself made this argument Monday, when justifying his decision not to place any income restriction on his debt jubilee, according to the Washington Post’s Jeff Stein:

This is an excellent argument for making public colleges and universities tuition-free to all comers. As they do with K-12 education, rich people would still often forgo public higher-education options, even as their tax dollars would sustain those institutions. And to the extent that the wealthy do avail themselves of free college, this would broaden social support for public higher education, while rendering our nation’s elites a bit less cloistered and out of touch with nonaffluent Americans.

But as an argument for an across-the-board student-debt jubilee, Sanders’s answer makes little sense. Student-debt forgiveness is neither universal (in any conventional sense of that term) nor a program. It’s a onetime transfer payment to the somewhat arbitrary universe of people who happen to hold some form of student debt at that particular moment in time.

Forgiving all private- and graduate-school debt without making private and graduate school tuition-free going forward doesn’t make much sense.

Critically, under Sanders’s plan, this universe of beneficiaries is not limited to people who attended public undergraduate institutions — the category of higher education that Sanders would make tuition-free, going forward. Rather, it also includes anyone who incurred student debt to attend private college, or law, medical, or business school, or any other graduate institution. And yet, Sanders’s plan would do nothing to decommodify those forms of higher learning.

There are coherent policy arguments for drastically reducing the costs of professional and graduate schools, if not for eliminating those costs entirely at public institutions. If U.S. doctors didn’t need to take on so much debt to practice medicine, it would be easier to bring their salaries down to international norms. If U.S. lawyers did not need to take on so much leverage to secure their degrees, perhaps fewer of them would lease their skills to concentrated capital. If the costs and financial risks of a life in academia were less formidable, perhaps more people from working-class backgrounds would enter graduate study, and bring their underrepresented perspectives to bear on pressing research questions.

But Sanders’s plan would not significantly reduce the costs of postgraduate study. It would cap the interest rate on graduate student loans, but have little impact on the amount that students need to borrow. Instead, it would merely deliver a windfall to one (largely) random cohort of indebted doctors, lawyers, and businesspeople, while doing almost nothing to aid the next one. On Monday, Sanders described his plan as a “revolutionary proposal” that would “allow every person in this country to get all of the education that they need to live out their dreams.” But his plan would do no such thing. For many young, aspiring professionals from low-income households, graduate education would remain as prohibitively expensive after the implementation of Sanders’s program as it is today.

It is unclear why we would want to compensate Harvard MBAs, but not formerly indebted public-college graduates.

The universe of people who would benefit from Sanders’s “universal” student-debt cancellation isn’t just odd for whom it includes (say, recently graduated Harvard MBAs working on Wall Street), but also for whom it excludes — low-income graduates of public college who happened to have already paid off their student debts.

Some advocates for a jubilee mock concerns about leaving such folks behind by observing that the complaint, “This reform would be unfair to those who had to get by without it in the past,” could be applied to any new progressive policy idea. Others interpret such concerns as an expression anti-solidaristic grievance politics, akin to the assertion, “If I had to be exploited by an unjust higher education system, then you should be, too.”

These are fine objections to the position that no student-debt relief whatsoever should be enacted. But they don’t actually explain why we should choose to design our student-relief program in a manner that compensates Harvard MBAs with outstanding debt, but does nothing for public-college graduates who were adversely impacted by debts that they have nevertheless paid off.

The moral case for student-debt forgiveness is, ostensibly, that a generation of college attendees were victimized by an unjust system of higher-education finance. U.S. policy-makers failed to control skyrocketing inflation in both public- and private-college tuition. They allowed wages for working-class people in (vitally important) blue- and pink-collar professions to stagnate or fall, thereby coercing young people into shelling out for the depreciating credential that is a college diploma. What’s more, policy-makers encouraged young Americans to view even high student-debt loads as a safe investment in their own futures, on the grounds that the economy was suffering from a “skills gap” that we now know did not exist.

Therefore, as Matt Bruenig has argued, student-debt forgiveness is effectively “reparations for victims of unfree college.” And there is no obvious reason why we should leave those victims who already paid their debts uncompensated.

After all, one of the stronger arguments for a jubilee is that the burdens imposed by a heavy student-debt load go beyond its sticker price. Studies show that student debtors are less able to save for retirement, and “more inclined to accept part-time work and jobs that are less related to their degree and offer limited career potential” than peers who lack such debts. The costs of these sacrifices don’t disappear once one’s student loans are paid off. The adverse impact of forgoing savings and job opportunities — so as to meet one’s debt obligations — can adversely impact a person’s lifetime earnings and living standards. For these reasons, it is not reasonable to assume that anyone who could afford to pay off their student debt is therefore less deserving or in need of aid than anyone who hasn’t.

There is no law that says our only options are to forgive all outstanding debt, or do nothing about the student-debt crisis. It is an active choice to design the program in a way that lavishes benefits on upper-middle-class professionals who are on pace to comfortably pay off their debts — but withholds all aid to lower-middle-class college graduates who have already paid off their debts through costly sacrifices. And there is no technical reason why we can’t compensate the latter group; their college and debt records surely still exist. And yet, Sanders, and other advocates of a jubilee, have not offered a coherent argument for why such people should not receive compensation.

The resistance to entertaining policy options beyond a clean and simple debt erasure may stem from concerns about where such a discussion might lead. Which is to say: Once one begins questioning who is and is not entitled to relief, it’s unclear where that questioning should stop. If our goal is to compensate the victims of unfree college, then what about all the working-class high-school graduates who chose not to go to college specifically out of concerns about tuition, and have paid a lifelong economic penalty as a result? To make our jubilee more comprehensive, should we append some lump-sum payments to all Americans of a certain age, regardless of their educational attainment? And if our fundamental moral purpose is to compensate those who were forced into debt by the U.S. government’s policy failures, then why are we restricting our jubilee to student debtors? Haven’t many noncollege-educated workers been forced into various forms of indebtedness by wage stagnation? Why aren’t we including (if not prioritizing) their debt burdens, given their greater disadvantages, relative to the typical student debtor?

These sorts of questions may be irritating. But if our aim is to craft a “revolutionary proposal” for debt forgiveness, then it’s unclear why such questions aren’t worth asking.

If Bernie’s proposal is good politics, its substantive flaws should be forgiven.

The strongest argument for a clean, across-the-board student-debt jubilee is a political one. Debt-burdened college graduates are a pillar of radical left-wing politics in the U.S. in 2019. Any socialist (or social democratic) movement that wants to maintain the engagement of its foot soldiers needs to prioritize their material needs, even if they aren’t the most disadvantaged constituency on planet Earth. Meanwhile, canceling all student debt is simple to execute, and easy to understand. The policy’s substantive drawbacks may double as political benefits — upper-middle-class professionals vote and donate to political campaigns at higher rates than less privileged people. It’s conceivable that cutting doctors and lawyers in on the deal will make it easier to get major student-debt relief enacted.

This all makes some sense in the abstract. And if it proves correct, then the regressive aspects of Sanders’s plan would be entirely forgivable. True, his proposal would not put $1.6 trillion to its most progressive possible use. But that’s true of every appropriation the U.S. Congress has ever made. If the choice is between doing nothing significant about the student-debt crisis, and indiscriminately forgiving all outstanding student debt, then we should absolutely do the latter. The inequities of the status quo dwarf those in Sanders’s proposal. What’s more, with inflation and interest rates stubbornly low — and the after-tax incomes of America’s rich alarmingly high — any scheme for putting a bunch of money in the hands of ordinary Americans, through a combination of deficit financing and millionaires’ taxes, is better than nothing. In a noninflationary context, any policy that increases consumers’ disposal income is likely to redound to our collective benefit. According to one estimate from Bard’s Levy Institute, by instantly increasing the purchasing power of 44 million Americans, canceling all student debt would increase GDP by between $86 billion and $108 billion per year, over the next decade.

If Bernie’s proposal isn’t good politics, its substantive flaws don’t really matter.

This said, it seems unlikely that the political argument for across-the-board student debt relief will hold true on Capitol Hill. The U.S. Senate doesn’t just overrepresent conservatives but also (relatedly) non-college graduates. Any Democratic Senate majority is all-but sure to include moderate senators who represent heavily non-college-educated states, such as Montana’s Jon Tester. Even if the United States has the fiscal space to forgive all student debt – and implement all of the Democratic Party’s many other ideas for how to spend $1 to $2 trillion – Congress’s legislative calendar, and moderate Democrats’ tolerance for new spending, are both finite resources. Legislative priorities will need to be set. And on the long list of expensive progressive reforms that the 2020 Democratic field has generated, few are likely to have less appeal for Team Blue’s red-state Senators than a $1.6 trillion transfer payment that is restricted to Americans who attended college. Green energy investment, universal child care, and wage subsidies for low-income workers all seem like more plausible asks.

Either way, though, the suboptimal aspects of Sanders’s plan don’t end up mattering much. If I’m wrong, and a student-debt jubilee proves not merely legislatively viable but more legislatively viable than the other big-ticket items on the Democratic agenda, so be it! If not, the distinctions between Warren’s and Sanders’s plans will be moot. We aren’t electing a dictator. A Sanders or Warren White House won’t be able to force moderate Democratic senators to do anything that they themselves do not feel compelled to do, for electoral or ideological reasons. The next Democratic president’s student-debt policy will be exactly as generous or means-tested as the Jon Testers of the world wish it to be (if such senators allow any student-debt policy to exist). For now, Sanders’s advocacy for a debt jubilee mostly serves to nudge the terms of the student debt debate in a more expansive direction, and assure a core left constituency that its voice is being heard. All the rest is academic.

Bernie’s Student Debt Plan Doesn’t Make Sense. That’s Fine.