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Student loans: will the elimination of student debt solve the problem? | Opinion

 Student loans: will the elimination of student debt solve the problem?  |  Opinion

Spring is in the air and my yard is waking up again. The roar of the lawn mower and the smell of freshly cut grass are bitter for my children because they mean the return of Saturday work in the yard. My kids are responsible for pulling out the last batch of weeds, but if they are left unattended, I only get a bunch of stems and they will collect the same weeds next week. Without solving the cause of the problem, they will just grow over and over again.

Unfortunately, running in election year is similar to my kids ’work in gardening. Treating the symptoms of the problem is much easier than digging up the roots. Such is the case with the ongoing debate around student loan forgiveness. Solid data and the best study of the causes show that college graduates earn morethere is improving healthenjoy more stable families and vote at higher rates. College is a great investment, but it has its risks and costs. However, anecdotes and politics of grievances cannot replace facts in policy making. Here are the facts.

First, despite reports of students with astronomical loan amounts, most borrowers should about $ 30,000 – the same as the average loan for a used car. About half Loan balances are held by employees with higher degrees (such as medical, legal, and MBA) and thus have the greatest earning potential. College may be the best way to tune someone into a middle-class lifestyle, but only 37% of taxpayers have a college degree

Typically, policymakers should seek to invest scarce government dollars either in initiatives with a higher return on investment for the entire community, or in helping those most in need. This is a classic compromise of efficiency and equality. The cancellation of a student loan does not achieve any of these goals. Instead, the repeal will direct public funds to those who are in the best of society, those who have studied in the wealthiest colleges and those who have the highest ability to repay.

These facts do not change the need for reforms. Private student loan markets are functioning poorly because education cannot be mortgaged like housing or cars. It is impossible to seize your knowledge and skills from creditors.

But access to student loans provides opportunities for those who would not have access to traditional financial markets. Recent research shows that expanding the student loan program will increase the number of students receiving diplomas (and reduce the time required to obtain them) and increase graduate salaries. With wise use, student loans are a tool that pays off.

Difficulties arise when borrowers do not graduate from college or do not enroll in programs (such as commercial universities or some college majors) that do not pay off in the job market. Life is also unpredictable. Losing a job, starting a family and changing your career can all hinder better pay intentions. However, the federal government has programs that, with proper staffing, good governance, and proper funding, can alleviate these problems. For example, income-driven repayment options (which limit monthly payments to a percentage of discretionary income or pause unemployment) are a mess. Too much red tape to qualify and confuse options with different deadlines. We could simplify the program and record participants by default.

We also need to invest in those who choose public service after college. Military service goes hand in hand with the GI bill, but the country needs school teachers in poor areas, doctors in rural areas, public defenders and talented government leaders. Although public debt forgiveness exists, it is such a low priority that the previous administration approved only 1% of applicants.

Currently, borrowers cannot repay student loan arrears in the event of bankruptcy because it is difficult to show “overload” when a college degree increases earning potential. However, Congress may amend the code to release students who have attended colleges closed to fraud or graduates whose loan payments far exceed their ability to pay after 10 years.

Finally, we could expand the Pell Grant program and simplify the accompanying complex application process that forces thousands of students leave billions of dollars on the tableor states may replace funding cuts during the last recession.

Our universities are the envy of the world, and access to them is increasingly becoming one of the best investments that young people can make. Student loans can be a way to help those who are not traditionally served by higher education to gain access to its benefits. These programs are in desperate need of reform, but resources, public attention, and the consent of lawmakers are all in short supply. Politicians would be better off looking for the roots of the problem rather than just pruning the stems.

Michael S. Kofoed, @mikekofoed on Twitter, is an associate professor of economics at the U.S. Military Academy and a researcher at the Institute of Labor Economics. A native of Utah, he holds degrees in economics from Weber State University and the University of Georgia. His views are his own and do not represent the U.S. Military Academy, the Army Department, or the Department of Defense.

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