The Debate Over Forgiving College Loans

My post earlier this week, quoting skeptical comments from an economist about a proposal to forgive student loans—as a way of stimulating the economy—has elicited a number of thoughtful comments on both sides. The distress of many graduates, saddled with loans, is palpable.

I’m guessing that Justin Wolfers, the economist in question, still thinks it would be both unjust and inefficient to forgive such loans, but the responses made me think that the following statement was too sweeping:

If we are going to give money away, why on earth would we give it to college grads? This is the one group who we know typically have high incomes, and who have enjoyed income growth over the past four decades. The group who has been hurt over the past few decades is high school dropouts.

Surely forgiving the loan debt of a Penn grad who has moved on to a job on the executive track would be pointless. But there are college graduates and college graduates. (And you don’t have to graduate in order to rack up significant debt.) I can understand why people who have borrowed heavily to invest in training programs that supposedly increased their prospects in the job market—dental-hygienist programs, I.T. programs—but who got no return, feel precisely like people who are heavily underwater on their mortgages. Particularly if employers don’t respect the institutions the degrees come from, Wolfers’s lumping of such “college graduates” with elite private-college alumni whose debt is merely a (sizable) inconvenience, may be unfair. The vitriol of his comments on the debt-forgiveness proposal suggests he had the latter people in mind. Maybe he would be more sympathetic to a more-targeted proposal.

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