In recent days, you might have heard about the outcries in the US regarding the current plans for student loan forgiveness. From those who believe that it does too much to those who believe that it does too little, people are heavily divided regarding the usefulness of the SLF. The reason for this is that this issue is becoming increasingly politicised. Both Republicans and Democrats know that student loans are a problem. However, neither are willing to compromise to work together to form an agreeable solution. They each have their respective media organisations running at full steam to convince the mainstream population that there is only one solution. Theirs. You have CNN and NBC publishing dozens of articles on relieved students who are finally freed from their loans while you have Fox highlighting afghan veterans who joined the military to pay off their loans and ended up losing limbs, all of these are just meant to draw an emotional response from viewers. That is not the way to do policy. Let's show them how it is done. In today's edition of D&D, we will be discussing inflation concerns due to SLF, the unfairness it causes, its supposed predatory nature, its effectiveness in closing the socio-economic wealth gap and finally possible solutions to the student loan crisis.
Right now, there is a belief amongst the critics of SLF that the execution of such forgiveness will result in inflation. That belief is justified but not to the level that they are making it up to be right now. However, before we get into this, a basic of what exactly SLF is is needed. The SLF is broken into 2 parts. A 10,000 subsidy for those without a Pell Grant and a 20,000 for those with a Pell Grant.(Something that 1 in 3 Americans have). Of course, the individual has to be making less than 125,000 a year to be qualified but there are already 43 million borrowers who stand to have their loans reduced and 20 million who stand to have their loans forgiven entirely. The fear is that this sudden decrease in debt will spur an increase in spending power triggering an inflation increase of 0.08% according to Moody's analytics. However, this inflationary effect is dampened by the fact that up till now student loan payments have been paused and once the payment freeze ends, the resumption of payment will offset the inflation by 0.11% according to Moody's analytics. But to be honest, at the end of the day, there are many moving pieces involved but inflation should not factor too much as a concern as the impact could be large at the end of the day, if it would be able to help the larger society it should still be done.
Another big belief of the critics of the SLF is that it is unfair for those who had to pay off their debt on their own or even worse those who chose not to pursue a college degree because they felt like they would not be able to handle the debt. At the moment, it looks like a handout to these people. Now at first glance, the concept of "I suffered so you too should suffer" stands out clearly and I do not think that that should ever be a justification for any kind of policy because if we followed that logic we would still be stuck in the dark ages without any technology. However, on a deeper note, there are 2 underlying factors that contribute to this feeling of unfairness. Firstly, for those who paid off their student debt on their own, it slowed down their ability to pay off other debts like houses or cars while if SLF goes through those who benefitted will be able to start paying off those debts much sooner. That seems like a luxury in all honesty. The SLF will use up hundreds of billions of taxpayers' money and the idea that a guy who worked hard and slowly to move up in life has to pay for another guy and help him rise to the same quality of life as he is, is frankly appalling.
Finally, a prominent issue that has been raised is the idea that the SLF will cause college tuition to rise. I know what you are thinking, what on earth could make the price increase again? At this moment in time, the SLF is ground-breaking, it was unanticipated and fresh. However, now that it has happened, people will be expecting or at least assuming it will happen again. In short, a precedent has been set. Evidence of such behaviour can be seen from the Student Loan Pause(SLP) that Biden instituted during the covid pandemic. While it seemed unthinkable at a time, people have grown accustomed to it and now a quick google search will reveal a number of notable articles speculating another pause. As a result, the colleges will be more comfortable in raising their prices as they know now that there is a chance of the government settling the tab for students. They are at the end of the day, profit-driven as well. (Revolting but oh well, price of unrestrained capitalism).
You might be thinking at this point, wait if this is all true, then why is SLF being passed in the Senate? The simple answer is this, righteousness. As mentioned in the earlier paragraph regarding inflation, morals weigh heavily in this decision. The people who wrote and passed this bill believe that student loans are predatory and that 18-year-olds are too young to sign such contracts and are hoodwinked into paying thousands of dollars to colleges. Hence, they believe that despite any cons, they are actually still saving lives and hence they are willing to pay any price and upset anyone.(In this case, hundreds of billions of dollars). Usually, I would commend that kind of attitude but in this case, they are not thinking clearly. Student loans are not predatory, this is just an outgrowth of an overly mollycoddled generation. At 18, they are able to vote and drive. 18 is the age of adulthood, they would have just finished their essential schooling and are given the freedom to decide what to do with the rest of their lives. If not then, then when? Besides, it's not like they are being isolated and forced into making a decision. They could always ask their teachers, parents, friends and family just like they have done with every other major decision in their life. The only distinction is that for the first time in their life they are taking responsibility in the real world.
Finally, there is another righteous belief that the SLF closes the socio-economic gap. It certainly does close a wealth gap but not the most significant one. It closes the wealth gap between black college graduates and white college graduates. According to CNBC, 24% of black adults have federal student loans while only 14% of white adults have student loans. They also graduate with 3,900 dollars more debt than their white counterparts on average. Hence, on the surface, it might look like SLF will solve this problem and provide a more level playing field. In reality, Biden is just not seeing the bigger picture. This SLF is only going to worsen the socioeconomic wealth disparity in America. After all, it only benefits the families who were able to send their kids to college. Hence, increasing the number of college graduates with little to no student debt whilst putting the families who were unable to send their children further in the red. This is highlighted by the Daily Wire which noted that less than 32% would benefit the Americans in the lowest 2 quintiles while 42% would benefit those earning more than 6.8k per month. So yes, another example of American politicians being so fixated on racial inequality, that they miss the larger problem.
But look, if there is one thing that everyone agrees with, it is that the SLF is the equivalent of putting your hand to cover a whole on a leaking pipe, sure its stops the water from leaking, but it does not address the problem about why the water is leaking and is only a temporary measure. The real question is how we can end this crisis. The fastest way to do this would be to cut the appeal of the colleges. The biggest appeal of college is the degrees. Something that has been deemed essential for almost every job these days. People are determined to go to college just to get a degree(read as "any degree"). The idea is that if they are good enough to get a place in college, they are smart people. We need to move beyond that. Biden needs to set up a task force to re-evaluate government job requirements. People should get degrees because they need further understanding or specialisation in a particular area to do a job, not just for the sake of getting a degree. The moment you do this, students will be more thoughtful and conscious when making a decision for college. On top of that, he should also consider the idea of improving his state universities, they can improve their curriculum whilst setting it at a more reasonable price for students but all of this takes time, years probably. So look, at the end of the day, Biden is simply choosing the easy way out at this point, if he really does want to solve the crisis, then he has to be more committed.
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