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Opinion | We need to abolish student debt, but only for some

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 Opinion |  We need to abolish student debt, but only for some

I have always been against the abolition of student debt. My main argument was that it benefits the rich more than the poor. After considering the value of education and the impact of student debt relief programs, an analysis by the Brookings Institution found that 20% of the richest families owe almost a third of all student debt. The lower 20 percent should only 8 percent.

Anyone with a degree already has an incredibly valuable resource – college education. Adults with a bachelor’s degree usually earn about Another $ 1 million for their careers than people with only high school.

In addition, forgiving student debt is disproportionate. Like Adam Looney from the Brookings Institution noted, widespread student loan forgiveness will be among the largest transfer programs in American history. And plans to forgive all federal loans will cost more than was spent from 2000 to 2019 on unemployment insurance, income tax credit or food stamps – programs that actually go to those in need.

Debt forgiveness sends terrible cultural signals. These people are already strongly divided on the basis of education. Today’s populists are justly angry that Americans with higher education have created a society that is pretty nice to them and their children and pretty rude to everyone else. Forgiving a student loan will be seen as another example of an educated class taking care of itself – and leaving everyone else to eat dust.

All this is still mostly true. However, I confess I had some other thoughts. I guess I came to the conclusion that it is wrong to generalize as if there is one group called “college graduates”. In fact we have at least two different classes of college students and alumni. One group is safe students and alumni – those who have come from middle-class homes and have some resources as they move from campus to adulthood.

Another group is unstable students and graduates. Over the past few decades, America has done a much better job of getting less affluent students through high school and college. These people enjoy the chance to make a big leap into the middle class, but they have few resources and have no right to make a mistake when they make that leap.

Some come to college unprepared. They accumulate debt but cannot graduate. In others there is a moment of “life happens”. Perhaps the parents get sick and they are forced to drop out of school to support the family. Some attended colleges, which, as they found out later, did nothing to make them more valuable in the market.

These insecure students and alumni are trying to make the leap in a historically challenging moment. The financial crisis and COVID-19 have damaged the career paths of young adults. Prices for education and real estate have risen. By the time the Boomers reached the average age of 35, their generation owned 22 percent of the country’s wealth. Millennials, who will reach the average age of 35 in 2023, own about 6 percent of the country’s wealth.

These insecure students and alumni have done what we wanted them to do – a leap for social mobility. But many now owe more than they have in abundance. Laura Beamer and Edward Neely of the Jain Family Institute found that in 2019 the student debt-to-income ratio was 98 percent for the lowest decile of income in America. This means that the average income for this group exceeded the average student debt by less than $ 700.

Particularly difficult conditions for African Americans. According to Brookings for 2016 report, the average black graduate owes $ 52,726 four years after graduation, compared to $ 28,006 for the average white graduate. Black borrowers are also much more likely to delay their payments.

For many of these young people, the debt burden changes their psychology and behavior. Many suffer from severe anxiety, feeling buried under relentless burden. It was difficult for them to go to the opportunity, to buy a house, to start a business, to have children – all that we want young people to do to ensure a dynamic and prosperous America.

I admire how Elizabeth Warren so passionately pushed the issue, but I am still far from proposing it that would benefit many people who don’t need it. And if you ask me if we should have a great student debt cancellation program, I will say no.

But if you ask me to tell you where the social mobility machine in America broke down, I’ll include how young adults with insufficient resources fall out between the ages of 20 and 35. Are there better ways to help these Americans than write off debt? You will argue. Do we live in a country where the law will be passed by Congress? We don’t.

Debt relief is something President Biden can probably do on his own. So I brag for the stern apology. I hope Biden will significantly increase the amount of debt he is willing to forgive, say, $ 20,000. But I hope it will limit apologies to inferior graduates – perhaps those from families earning less than $ 75,000, perhaps those who have already received Pell grants.

Social changes over the last few decades have forced me to be much more supportive of income redistribution than I was before, especially redistribution that invests in human capital. But it should be a distribution down, not up.

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