Don’t forget the universities

When President Biden announced on Aug. 24 an executive order that would wipe out half a trillion dollars in student debt, the political reaction was predictably polarized. Prominent Democratic lawmakers and, (predictably) many of the millennials who would benefit most from the loan forgiveness applauded the move.

Still, many progressives complained that forgiving $10,000 per student was a weak compromise and insisted that nothing less than full debt cancellation would do. Conservatives, meanwhile, almost uniformly opposed the measure, questioning the legality of such an executive order, condemning it as a cynical pre-midterm ploy to buy votes from a demographic that leans left, and suggesting that the very idea of loan forgiveness was fundamentally unjust and foolish.

The first two conservative critiques may be fair enough but may seem a bit familiar to anyone who follows contemporary politics. After all, with Congress increasingly dysfunctional, both parties have resorted to executive orders to take the place of laws in recent years—a lamentable development, to be sure. And ever since there have been political parties, there have been cynical efforts to mobilize certain voter blocs by enacting policies that benefited only a select demographic.

So, let’s consider this initiative on its merits—is it unjust and foolish to forgive the debts of college graduates? In principle, no. In practice, yes.

In principle, there is nothing necessarily wrong with erasing a debt. To be sure, ordinarily, we must each pay what we owe, and anything less is unjust. But Scripture itself recognizes that sometimes, debts can balloon into crippling burdens, weighing individuals and even generations down with bills they may never be able to pay. The Law of Moses made extensive provisions, through the “year of Jubilee” (Leviticus 25), to cancel all debts every 50 years to prevent any family in Israel from falling into long-term debt slavery. Although, of course, this law no longer binds us directly, its principles have informed the development of Christian law, in particular bankruptcy codes. Indeed, the United States has remarkably generous bankruptcy laws, partly due to its deeply Christian heritage.

Moreover, any lender can, of course, choose of his own will to let a borrower partially off the hook—whether simply through mercy or because he knows he’s unlikely to receive the full amount and would rather get something than nothing (see Luke 16:5-7). If college graduates owe the U.S. government money, well, the U.S. government always has the right (in principle) to reduce their debts—if done lawfully.

Of course, some borrowers may deserve such mercy more than others. Where some student debtors are trying their hardest to repay and failing, others continue in debt due to laziness or irresponsibility. Anytime you erase the debts of tens of millions at the stroke of a pen, you’ll incentivize a lot of bad behavior.

However, the most considerable bad behavior being incentivized is perhaps not that of students but of colleges and universities, to whom Biden’s policy comes as a huge and massively unjust windfall. Consider: the No. 1 reason why student debt is so oppressive in the United States—$1.6 trillion before the recent announcement—is quite simply because college tuition is out of control, tripling in inflation-adjusted terms over the last four decades.

Universities, and their government enablers, spent decades selling the lie that a college degree would help young people succeed in the workplace and that no price was too much to pay for such a leg up. In fact, the evidence suggests otherwise. Indeed, if the myth were true, we wouldn’t have a student loan problem because graduates would earn enough to repay their debts. Students and their families have been seduced into borrowing against their own futures.

The only way to deal with the student loan problem over the long haul is to make universities shoulder the risk when they charge outlandish prices. Biden’s plan does precisely the opposite, issuing an implicit invitation to colleges to hike tuition all they want because the government is here to help. As long as higher education institutions know that someone else will always pay the bill—whether students or taxpayers—they will do what any sensible businessman would do: keep raising the price. Imagine what would happen to the price of cars if dealerships knew that the government guaranteed all auto loans.

Democrats, of course, are unlikely ever to hit one of their key constituencies—university administrators—in the pocketbook. But any serious reform of student loans will have to start here: making expensive colleges, not taxpayers, chiefly responsible for financing the purchase of their product.