Health care for all. Legalized gay marriage. Permitted marijuana use. These are ideas that once seemed unrealistic – outrageous even. But, depending on where you live, they may already be a reality. As Democrats in the United States vie for the 2020 presidential nomination, there is a growing chorus among them to pass legislation that would eliminate some or all student loans. Most recently, Kamala Harris proposed forgiving $20,000 of student debt across certain low-income communities. A total cancellation would cost the US government a staggering sum, over $1 trillion. Simultaneously, it would free millions of people from economic burden. Is today’s pipe dream the next piece of landmark legislation?
In 2018, more than two-thirds of American students graduated from college with debt. That averaged around $30,000 a person. In Canada, it was only a few thousand dollars less. In both countries, the debt load increased substantially when students pursued postgraduate studies, such as law or medical school. Oftentimes, that debt can never be discharged – not even through bankruptcy.
The arguments for and against student loan forgiveness are easy to grasp. Proponents argue that debt saddles the next generation, often precluding them from purchasing homes or saving for their futures.
“I think the vast majority of student loans should be forgiven,” says Alexis Assadi, a financier. “Governments are, in effect, enslaving a big portion of their own populations by drowning people in loan payments. If an entire generation is virtually precluded from building wealth for decades, when they retire those same governments will have to bail them out via social assistance. That’s the irony. We may as well deal with it now.”
Mr. Assadi argues that governments should apply an equal economic standard. “In 2009, taxpayers saved mega corporations from collapse. Banks and insurance executives made reckless decisions, caused the economy to implode, stuck the public with the bill and made out like bandits. The government came to their rescue. So why is it unreasonable for it to help average people who are trying to become educated?”
Skeptics, however, worry that widespread forgiveness of student loans could add more to already bloated government balance sheets. The United States currently owes a total of $22 trillion. Cancellation of student debt could pile on another trillion dollars. Others feel that student debt is a part of life that people must learn to cope with. They view it as yet another entitlement felt by millennials. Former US president and first lady, Barack and Michelle Obama, famously did not get out of college debt until their 40s.
Moreover, some wonder whether the wrong question is being asked. Perhaps it is more prudent to consider why the cost of education continues to rise, while wage growth has remained relatively flat.
Student loans are rapidly becoming part of the broader political conversation. Unsurprisingly, younger adults are the fiercest advocates for a complete cancellation. Today that’s a long-shot. But the same was once said for universal suffrage, legalization of marijuana and plenty of other hot-button topics.