What’s the answer for student debt?


Some folks feel pretty strongly about the Biden administration’s plan to help those who find themselves drowning in student debt.

Take this post from a Facebook user named Brandon Gill.

“Some 18-year-olds took out huge loans to party for four years and get worthless degrees,” it says. “Many of my high school friends took out responsible loans to buy welders and work trucks and went straight to work. My blue collar friends should not be forced to pay irresponsible people’s debt.”

A message shared by Occupy Democrats offers a different perspective.

“My wife and I paid off two graduate degrees and we paid for our son’s degree,” it says. “Every last penny. If Biden forgives student loans, I’m going to cheer. I come from a generation when we actually wanted our kids to have it better than we did.”

Reports indicate the U.S. Department of Education is considering a plan that would forgive up to $10,000 in debt for those making as much as $150,000 a year.

According to the Education Data Initiative, Americans owe $1.75 trillion in student loans. The average debt is $39,351, and the average monthly payment is $393. In Indiana, the average debt is $33,106.

The total number of Americans paying off student loans is 43.2 million, and 2.6 million of them owe $100,000 or more.

There are some reasonable questions to be asked about the administration’s plan. First off, why does the relief stop at $10,000? How much good will that really do when the average debt is nearly four times that much?

What would it do for someone who owes $100,000?

And why are we capping eligibility for relief at $150,000 in annual income? That’s far more than most Americans will ever make in a year.

A recent study by economists Sylvain Catherine and Constantine Yannelis concludes that three quarters of the benefits of such a plan would flow to households with higher incomes.

Katharine G. Abraham and Michael R. Strain point out those findings in a recent essay for Politico.

They come at the issue from opposite sides of the political divide. Abraham is an economist at the University of Maryland who was a member of the White House Council of Economic Advisers in the Obama administration. Strain is a senior fellow and director of economic policy studies at the American Enterprise Institute.

In their essay headlined “Biden’s About to Make a Big Mistake on Student Loans,” Abraham and Strain call the plan regressive and unfair.

“Over time,” they write, “it could well increase the number of people struggling with student debt. And while billed as a ‘one time’ policy, it would set a terrible precedent.”

They suggest instead that the administration look at expanding a program that is already in place. This “income-driven repayment” plan allows borrowers to repay loans based on how much they make. Payments are set at 10% of a borrower’s discretionary income, and any remaining debt is forgiven after 20 years of payments.

Abraham and Strain suggest making it easier to enroll in the program and streamlining the annual process for calculating payments.

Regardless of the ultimate solution, the administration needs to address the causes of this crisis. It needs to examine the overall cost of a college education.

How much of that cost should be borne by the individual? And how much should be borne by the government?

Doesn’t the government have a stake in ensuring an educated populace?

In Finland, education is free all the way from preschool through college. College students there also qualify for medical care, a free lunch and a monthly stipend to cover living expenses.

Students can earn a bachelor’s degree or vocational certificate in three years, and if they move on to graduate school, that’s free, too.

Could the United States learn anything from Finland?

Kelly Hawes is a columnist for CNHI newspapers in Indiana. Send comments to [email protected].

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