In Washington, about 800,000 residents owe more than $27 billion in student loan debt – an average of about $35,000 per borrower. That burden can slow their pursuit of the American Dream – the ability and willingness to purchase a home, start a family or partake in other traditional rites of adulthood.
With that story being repeated throughout the country, President Joe Biden faces a difficult decision. Advisers are debating action toward canceling or reducing federal student loans – an action that is rife with practical, political and philosophical consequences.
While there are no easy solutions, elected officials must give significant weight to the fact that burdensome student loans were willingly taken out by people seeking an education. Those now facing debt made a commitment they should follow rather than relying on government largesse. Millions of Americans have dutifully paid off their own student loans, recognizing that those loans were an investment in themselves and their professional potential.
That is a practical implication of the situation. Another is exemplified by high inflation that has burdened Americans of all economic classes. Canceling debt for millions would infuse more money into the economy, leading to more money chasing the same number of goods and inherently adding to inflation woes.
Meanwhile, there are political and philosophical implications. Relieving student debt was one of Biden’s campaign promises; ignoring that vow risks alienating progressives. At the same time, debt forgiveness risks alienating those who have paid off their loans and those who adhere to a market-driven approach to capitalism. It is reasonable to say those who made a commitment to pay back loans should follow through on that commitment.
“It’s a deep political problem,” a former aide in the Clinton White House told The Washington Post. “The fact they have hesitated for so long to put their chips down on the table suggests they’re fully aware of the potential economic and political implications of taking a major step in this direction.”
Regardless of which strategy the White House adopts, the issue must be addressed. Americans hold $1.6 trillion in federal student loan debt – more than either credit card or auto loan debt. And that is only federally held debt, not including private loans or loans through state programs.
All of this speaks to a larger issue regarding the funding and the cost of higher education. A system has festered in which college and professional training is often unaffordable, requiring students to go into debt to pursue a productive future. Over the past four decades, states have rapidly reduced investment in public colleges, contributing to an untenable burden on students while bolstering the lending industry.
The Washington Legislature this year took steps to mitigate the problem. HB 1736 was signed by Gov. Jay Inslee to establish a state-run student loan system with low interest rates. It passed along party lines, with support from Southwest Washington Democrats and opposition from Republicans. The Legislature also passed a bill to help public employees manage student debt.
But the problems extend well beyond Washington. In every state but North Dakota, the average student loan debt is more than $30,000. Not everybody holds debt, of course, but the cumulative impact affects every state and is a burden for an entire generation.
That creates a conundrum for the administration. While there are strong reasons for canceling student loan debt, the arguments for holding people to their obligations and for avoiding inflationary pressure are even stronger.
