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WALSH: Six Reasons Why Student Loan Forgiveness Is A Financially Disastrous And Morally Abominable Idea

In her desperate pursuit of young voters, Elizabeth Warren has tried chugging brews on Instagram and blogging about Game of Thrones. I expected next to see her shredding a half pipe or crowd surfing at Coachella but she has skipped those steps and gone right to the Democratic fail-safe: bribery. This week, Warren released her plan to offer "student loan relief" to the vast majority of college graduates.

From CNN's report:


Warren's new plan would forgive $50,000 in student loans for Americans in households earning less than $100,000 a year. According to analysis provided by her campaign, that would provide immediate relief to more than 95% of the 45 million Americans with student debt. The Massachusetts Democrat and 2020 contender is also calling for a drastic increase in federal spending on higher education that would make tuition and fees free for all students at two- and four-year public colleges and expand grants for lower-income and minority students to cover costs like housing, food, books and child care.


The campaign estimates that the plan would cost $1.25 trillion over 10 years. The revenue from Warren's wealth tax proposal -- a 2% tax on wealth above $50 million and a 3% tax on wealth above $1 billion -- would pay for her newest proposal, her campaign said.

The plan would actually offer loan forgiveness or reduction to households earning up to $250,000 a year, which means that doctors, engineers, lawyers, architects, and other gainfully employed members of the upper class would get a piece of the redistributed pie. Warren's idea is more extreme than most Democratic proposals, but that will likely change. The primary race has become a game of socialist poker, with each candidate constantly upping the wager. "I see your single payer health care and raise you reparations." Of course all the chips are bought with other people's money.

Warren's proposal is absurd. But any student loan forgiveness proposal is doomed to absurdity. There is just no morally or financially reasonable way to suggest such a thing or enact it. Let's take a brief look at the list of problems:

1) From a financial perspective, as the National Review points out, we would be feeding the very monster we're ostensibly trying to destroy:

...the inflation of college costs is a genuine concern, and one that is of especially intense interest to the federal government ,which, thanks to the Obama administration, made itself into a monopolist in the student-loan business. But Senator Warren here proposes to put out a fire with gasoline, i.e. to mitigate the effects of inflation by dumping money on the problem.

In inflation-adjusted terms, government spending on higher education has never been higher. In has climbed by nearly $2,000 per student (in inflation-adjusted dollars) since 2001. As the Foundation for Economic Education points out, Pell Grant spending alone rose 72 percent in the few short years from 2008 to 2013. Tuition and other expenses have risen right along with that spending, driven mainly by an explosion in administrative costs. In the 1980s, there were about twice as many professors as administrators on our college payrolls; today, that number has been reversed, and there are about twice as many administrators and staff as instructors. Administrative spending has increased substantially relative to spending on instruction — and both are much higher in real per-student terms.

If you want to get control over tuition inflation, try turning off the spigot. Senator Warren suggests opening it up all the way and adding some new ones.

2) It is extraordinarily unjust to the working class. Many blue collar people are living on lower wages because they couldn't afford to go to college. They chose the responsible route, stayed within their means, avoided buying something they couldn't pay for, and accepted a humbler lifestyle as a result. Warren and her Democratic cohorts plan to make fools of these people. It turns out they could have just gone to college, taken out the loan, and never paid it back. Student loan forgiveness rewards irresponsibility and punishes responsibility.

3) Speaking of punishing responsibility, what about all of the millions of people who struggled for years to pay off their loans and eventually succeeded in doing so? What about the person who just paid the last dime on her $100,000 loan a day before Warren's loan forgiveness bonanza goes into effect? Does she get a refund? If so, this plan just got several trillion dollars more expensive. If not, this plan is, once again, ridiculously unjust.

4) Putting aside the disastrous financial impact of loan forgiveness, and even putting aside how it screws the working class and those who paid their loans, we are still left with a very simple fact that seems to negate any argument for a proposal of this sort: nobody forced anyone to take out these loans. If you have student debt, you agreed to it. You signed on the dotted line. You made a legal arrangement. It does not make moral or logical sense for a third party to enter the picture and say, “You don’t have to fulfill your obligations and keep your promises.” I know we are way past worrying about silly things like the Constitution, but how does the State even have the Constitutional right to appropriate funds from one citizen in order to fulfill the financial obligations of another?

All of the talk about "relief" and "forgiveness" obscures the point. The government cannot snap its mighty fingers and make the debt go away. That is not going to happen. No plan has been presented that would or could accomplish such a thing. Someone has to pay your debts. The debt you agreed to, while purchasing the product you wanted and will keep, has to be paid. The only question is this: who should pay it — you or someone else? I don't see how you could offer any sound argument for the latter. Even if you can convince me that the debt is "unfair" and "predatory" and you were "taken advantage of," it still seems clear that the fairest of the unfair remedies is for the person who took out the loan to pay it. Because if it's unfair that you have to pay your loans, it's certainly many times more unfair that I should have to pay your loans.

5) Whatever possible argument could be made for loan forgiveness would clearly apply just as much to any other form of debt -- mortgage, car, credit card, etc. If you're struggling with student debt and you're handed a get-out-of-jail-free card, and I didn’t go to college but I’m struggling to pay my mortgage, should I not be offered the same deal? If your debt is a public emergency, why isn't my debt also an emergency? It's true that I can file for bankruptcy, but bankruptcy ain't free and it ain't fun and I'm probably going to lose a lot of my stuff in the process. You don’t have to declare bankruptcy under this plan or any other I've seen. Why should I have to take that step? What makes you special? What happened to equality under the law?

6) The crisis could be solved rather easily and without any sweeping government programs. There is a simple step we could take as a society which would, in the long term, negate most of the problem. All that needs to happen is this: we have to stop shipping every 18-year-old off to a four year college right out of high school. As long as we are determined to continue along this suicidal path, nothing will change. But if we are interested in restoring a bit of sanity to the proceedings, we don't ultimately need free college or loan forgiveness or any other form of welfare.

There is no downside and tons of upside to a kid out of high school getting a job for a few years, saving some money, gaining experience and maturity, and figuring out what he actually wants to do with his life before deciding on his educational plan. I can think of no rational argument against encouraging this course of action. I can think of trillions of problems with the opposite course.

If we turned off the conveyor belt that unthinkingly dumps every high school graduate into a four year institution, ultimately we would end up with fewer people going to college (because more kids would discover vocations that don't require a degree), and the ones who do attend will be more financially secure and more mature upon entering. This is the closest thing to a real solution you're ever going to find for a problem of this sort, and it's a hell of a lot better than the one that Warren offers.

 
 
 

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