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The Truth About Student Loan Forgiveness

AMAC Exclusive – By Andrew Abbott

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

While the left has portrayed student debt forgiveness as a benefit for working and middle-class Americans, the facts suggest that it is actually these individuals – many of whom did not go to college precisely because they wanted to avoid the burden of student debt – who will be stuck with the bill, while those who took out the loans – many of whom come from wealthy families and enjoy a comfortable lifestyle – will benefit the most. At the same time, simply forgiving student debt would do little to address the structural problems with higher education that precipitated the student loan crisis to begin with.

Late last month, Senator Elizabeth Warren wrote a New York Times op-ed imploring her party to make a big move now or face calamity in November. “To put it bluntly,” she wrote, “if we fail to use the months remaining before the elections to deliver on more of our agenda, Democrats are headed toward big losses in the midterms.”

Among her laundry list of potential actions was “student loan debt cancellation.” On the campaign trail in 2020, Biden had pledged to borrowers that he would “eliminate your student debt,” but declined to outline any sort of plan for doing so. Once Biden took office, however, he soon qualified that promise, with the White House floating that it may be open to cancellation of $10,000 of student debt per borrower.

But while progressive leaders insist this is something Biden can do with the stroke of a pen, via Executive Order, the President has been waffling, calling for Congress to pass legislation to address the student debt crisis. Perhaps Biden recognizes the disastrous effects of his other massive spending policies, and doesn’t want to be solely responsible for the inevitable uptick in inflation that blanket forgiveness of student loan debt would lead to.

According to estimates, the $10,000 model of student loan forgiveness being pushed by the White House would cost taxpayers as much as $2.4 billion – most of which would be paid for by Americans who did not go to college. Should progressives win their battle and force Biden to up the dollar amount to $50,000 per borrower and remove income restrictions, it would cost a whopping $321 billion.

But regardless of whether the White House forgives all or none of the student debt currently held by Americans, it will do nothing for the students currently in school, and will do nothing to solve the root of the problem – the rapidly increasing cost of a college education. Over the last 20 years, the average cost of tuition has increased more than 180%, exponentially outstripping inflation or other cost-of-living adjustments – an all-important fact which progressives conveniently ignore.

With such a spike, one would assume that product (a college degree) has also increased in value as well. Yet, by almost every metric, the opposite has occurred. Recent data makes clear that the expected income and wealth boost from a college degree is in steep decline. In 2011, two university professors tracked 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 of college.” Similar studies have 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 the staggering tuition dollars are being spent on administrative staff, college amenities, bigger buildings, and increased pay for professors. 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.” Over a dozen major colleges have installed similar water park features at their schools at more than $10 million per project. What effect a water park has on the quality of education a student receives is not particularly clear.

But all these instances raise one central question. Why increase prices so aggressively if the money can be spent so frivolously without need? For decades, individuals would pay for college by joining the military, taking out personal loans through local banks, or simply saving up. Starting in the 60s, the federal government began subsidizing these loans. This led to the creation of the Student Loan Marketing Association (Sallie Mae), a semi-private government agency that would provide and service the government’s student loans.

In the late 90s, Sallie Mae began an aggressive campaign to pressure students to take on more and higher interest loans than they needed, often with the explicit support of the colleges. In some cases, colleges would actively place “Sallie Mae employees in university call centers to field questions from students who thought they were getting advice from college loan officers.” As colleges increased their tuition, the government would offer more lavish government subsidies that only served to inflate the market further. This, combined with the collapse of the manufacturing industry, meant that prospective students believed college was the only chance for a financially prosperous future and were willing to sign anything.

Yet, as a former Sallie Mae employee would reveal after retiring from the industry, “our customer was almost every bit as much the college as the student.” To the government-backed student loan industry, it was just as much about making money for colleges as it was providing loans for students. While the for-profit student loan industry has faced greater scrutiny and Sallie Mae has left the student loan industry, the high-tuition rates are now being maintained and exacerbated by the colleges and universities themselves.

Last year, for example, it was revealed that Columbia University hired a marketing firm to actively recruit college graduates for a prestigious Film Studies Masters in Fine Arts. The school promised its students that this prestigious Ivy League degree was a golden ticket into the film industry. Graduates of the program leave with $181,000 in student loan debt. But despite the “prestigious” degree, barely a handful of graduates worked in the film industry, and half made less than $30,000 a year. While students are undoubtedly making 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 taking on massive loans to attend college.

When the state of higher education in the United States is viewed as a whole, it soon becomes apparent that the student debt crisis is just a symptom of a much larger problem inherent in the system itself. Far from a permanent fix, forgiving student loans would only provide temporary short-term relief for borrowers while saddling them and their children with the long-term economic consequences of such a move – not to mention the moral hazard of setting a precedent that the government will simply forgive your debt if you take on more than you can pay. Democrats may soon find, then, that this last-ditch attempt to save their majorities may also backfire and exacerbate the economic crises they have already caused.

Andrew Abbott is the pen name of a writer and public affairs consultant with over a decade of experience in DC at the intersection of politics and culture.  


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George
1 month ago

Student Loan Forgiveness is a new way to fund colleges and their increasingly increased costs.

Teri Brezin
1 month ago

The amount of money to get worthless degrees in today’s world is ridiculous. Students are paying for propaganda and not learning anything except how racist they are or how oppressed they are and to hate our country. Nothing but communist style propaganda. Colleges have always been pretty expensive, but with all the government backing, they’ve gotten out of control.

Ralph
1 month ago

Democrats supposedly are big on “fairness” and “equity”. Let me ask, what is fair and equitable about forgiving student loan debt for some when untold numbers of other Americans have taken responsibility for paying back their student loan debt? The answer is nothing. It would be a serious injustice to those who paid back their student loan debt and then be forced as taxpayers to help cover the cost of loan forgiveness for the freeloaders.

CaRepub
1 month ago

Come on, you can’t buy votes unless you spend money whether it’s yours…or the tax payers. Everything this administration does is to buy votes. Look at every program the Dems have pushed for years and it’s always the same- a giveaway to buy votes. Notice I didn’t say “free”. You’re an idiot if you believe anything at anytime is free. “There is no free lunch”. Same question I always have- where are the Repubs doing anything to to stop the stupidity? Oh wait, they’re too busy sending another 40 billion dollars to what just a year ago was called the most corrupted government in Europe. Glad the defense industry are getting rich at your expense? The oldest adage in the book always still applies- you want to know what’s really going on, follow the money. Vote and prepare folks. This really can’t continue as it is…..

Ray
1 month ago

Why should I pay for their decision to take up a curriculum that won’t pay them in life. I had the G.I Bill but had to take out loans to finish. Paid everything in 5 years. Many don’t have great health care and didn’t pick their illness. They could use the money instead. Plus, the universities got their money, go after them. And if Warren is so concerned about debt, fork up the money yourself. And quick picking my pocket for every ludicrous idea.

Sgt Pops
1 month ago

I paid my student loans back, why doesn’t everyone else have to do the same? In my college years I only took out 2 small student loans to make sure that I could pay them back. If they took too many loans to pay back it’s not the fault of the taxpayers.

Sam
1 month ago

There shouldn’t be forgiveness of any loans. You know where you are going with this and these people who took these loans gained an education or flunked out or even dropped out so the taxpayers should not shoulder this expense. The government doesn’t generate income they collect money from citizens! When the government says that they are going forgiveness loans they essentially are giving the burden to the taxpayers! SO NO FORGIVENESS!

Willard Hubbs
1 month ago

Does anyone remember when Obama had the government take over student loans? Now they can buy votes by for giving their loans. This would not have been possible if banks had control of student loans. Elections have consequences. Wake up Americ

Ted Wood
1 month ago

How about the Universities and Colleges give back 50% to the Loaners?

Doyle
1 month ago
Reply to  Ted Wood

Yes.. universities and colleges have been ripping students off for 40 years. Education should be cheap.

Marie Langley
1 month ago

What happened to “Anyone making less than $400K a year will not pay any new taxes”.
Typical career politician. Tell the people what they want to hear and hope they believe you. LIAR, LIAR, LIAR

T C
1 month ago

This forgiveness would include forgiving loans on people that went to college, partied for a year, and got kicked out. It would be interesting to compare the total amount to forgive if you removed those that did not get a 4 year degree.

Dale
1 month ago

I worked hard and payed mine off, so can they!!!

PLGJ
1 month ago
Reply to  Dale

Yes, so did I! I attended trade school instead of college (twice — once for electronics, once for aviation maintenance) and took out student loans, about $35k total. • I had to apply for forbearance a few times after being laid off. Forbearance stops your payments for six months at a time, but interest still accrues and is capitalized at the end of the forbearance period. • Sallie Mae offered me a chance to refinance the loans. I said no; I wasn’t going to go down THAT rabbit hole! • Forbearance made my total loan amount that much higher, but those forbearance periods helped me out of a couple of tight jams. I did eventually pay off the loans.

Garye
1 month ago

Here they go again, useless joebama and marxist democrat party buying votes at the expense of all the hardworking taxpayers!!
HELL NO , I don’t WANT MY money going to pay off others debts of ANY kind!
These snowflakes need to get off their backsides, go to work and pay what THEY OWE!!
I hope most people recognize that MANY student loan dollars pay for spring break, cars , partying and any other treat these kids desired!!!
If you decided to borrow $$$$ for a degree in grasshopper watching that’s 100% on YOU!
Time to put on your big boy pants and GROW UP!
Nothing is FREE.

Dean
1 month ago

This insanity is nothing new. Keep this in mind, the cost of energy, food and housing has not grown faster for colleges than the general public. Colleges pay less utilities the months when schools are closed. They are tax exempt; they often get a better rate for utilities than a residential customer and yet the tuition has exploded. They are buying up massive property to build new facilities that require more funding and staff just to maintain. All this land then comes off the municipal tax rolls and they lose the income for the community. Thís is the exact same process going on with our federal government. The high schools and colleges are not being clear as to the job market for projecting how students will be able to live after getting this overpriced and often useless diploma. This is vital for parents to help the student make an informed decision about the future. How many grads from art schools are living above the poverty line within the first 5 years? How many Plumbers, electricians, carpenters, HVAC techs, masons are out of work or living below the poverty line? These skills do not require college.

Garye
1 month ago
Reply to  Dean

Dean,
Youre right, but many college graduates cannot answer those questions.
You borrow, YOU PAY!
Not to hard to understand.

Raymond Harper
1 month ago

Under no circumstance should taxpayers be stuck with student loans. Pay your own bills !!

Dianne H Murphy
1 month ago

Well the problem doesn’t start with the end but with the beginning. Who approved all these loans especially to students whose parent could and should pay for their college education. There is a course nothing that can not be done with that end be I believe the tightest of regulations should be applied to who get forgiveness and what it will cost. I feel Individuals who have worked in service fields should receive the highest amount of debt forgiveness ie an attorney that volunteers at a legal clinic would get consideration. I know there are many issues to discussed but I think it is time to stop the handouts Thank you for allowing this opportunity to voice my opinion

Garye
1 month ago

Great questions Diane, great questions!

Charles Wood
1 month ago

Every time the Government gets involved in industry or other private programs it makes all outcomes much worse. The Government should never have got involved in the Student loan programs.

Rich C
1 month ago

Pretty simple, give more freebies and hopefully get more votes. This has nothing to do with integrity or responsibility. The “great American dream” is about working hard to get where you want to be, not to rely on the government to meet your needs. Free anything is a very dangerous path but so transparent for what the politicians want.

Robert Zuccaro
1 month ago

Its like having the lawsuit jury pay the plaintiffs. Easy fix: have the universities where they got their gender studies degree forgive their loan! They caused the debt.

Garye
1 month ago
Reply to  Robert Zuccaro

I like that idea!
Why is it that some colleges worth millions or billions receive ANY taxpayers $$$$????

David P Nelson
1 month ago

The Loan document that (you) signed is a legal Contract. Put on you BigBoy Pants and accept (your) responsibility to honor its terms. PERIOD!

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