President Biden should cancel some college loan debt, but not for everyone. Robert Gehrke explains why.

If it’s done right, forgiving student debt could provide a boost to the nation’s working class.

(Francisco Kjolseth | The Salt Lake Tribune) Robert Gehrke.

Last week, Sen. Mitt Romney teed off on an idea reportedly being considered by President Joe Biden to forgive some level of college student loan debt.

The Utah senator, who is worth as much as a quarter-billion dollars, according to his latest financial disclosure, dismissed the still-half-formed notion of college debt forgiveness as election-year antics, a buy-out to people who simply got in over their head.

“Desperate polls call for desperate measures: Dems consider forgiving trillions in student loans,” Romney tweeted. “Other bridge suggestions: Forgive auto loans? Forgive credit card debt? Forgive mortgages? And put a wealth tax on the super-rich to pay for it all? What could possibly go wrong?”

Romney exaggerates some. Even the most generous idea being floated — forgiving up to $50,000 in debt for every student, thus wiping out all debt for 79% of the 37.9 million borrowers — would cost $900 billion.

Still, I understand the resistance. The notion of across-the-board student debt forgiveness has always had an element of unfairness to it: Why should students who saddled themselves with debt by attending an expensive private college get relief, paid for in part by students who worked two jobs to get through a lower-cost state school or community college?

And what about those students who are in the Public Service Loan Forgiveness program? Do they now get treated the same as people who perhaps took a more lucrative private-sector job?

Or how about those who served in the military and benefitted from the GI Bill? They get nothing while we give a pass to a student who ran up $176,000 in debt to get a film degree at New York University? Doesn’t really seem right.

At the same time, college debt inflicts a severe burden on a broad swath of Americans. The average American owes $36,510 in loan debt. Monthly student loan payments, according to a J.P. Morgan study, gobbled up 10% of the average borrowers’ take-home pay.

If COVID-related loan forbearance were to end, a survey by the Federal Reserve found that more than one in eight borrowers would miss a debt payment — whether its a mortgage, credit card, car loan or student loan.

Moody’s analysts have said that the burden of college debt is a significant drag on the economy.

Fortunately, Utah has one of the lowest student loan debt loads in the country, Separate studies from WalletHub and LendEDU.com, with the average debt per borrower of $16,663. That speaks to the value of Utah’s higher education system and perhaps our frugality as a people, but still puts a considerable burden on Utah’s young working class.

Imagine being fresh out of college, embarking on a new career as a school teacher, for example, and trying to make ends meet in this housing market with that kind of debt. Maybe you plan to get married and now there are two loans to pay.

If it’s done right, forgiving student debt could provide a boost to the nation’s working class. But it has to be done right.

“Most of the people who go to college in America are relatively affluent to begin with,” said Adam Looney, a professor at the University of Utah and a former U.S. Treasury official. The gap between the earnings of high school graduates and college graduates has never been bigger.

“When you think about who has student debt and whether or not a person’s debt should be forgiven, you have to have in the back of your head that the people who own the debt are well-off to begin with, they have a college education, they have a lot of benefits,” Looney said.

Blanket forgiveness has the potential to favor those predominantly White, well-off students and exacerbate the existing inequalities.

There are a number of proposals for how to make sure any debt forgiveness is narrowly tailored to provide the most help to those struggling with their loans.

I’d like to see modest loan forgiveness, perhaps $10,000 for the lowest incomes with the amount phasing down for those making more than $50,000. Those making over, say, $75,000 wouldn’t qualify. There should be an additional relief available for those working in underserved communities, non-profits or in public service.

Graduate school loans should not be eligible for forgiveness. Sorry.

One idea, put forth by Erica Blom of The Urban Institute, that makes a lot of sense would take the amount of needs-based Pell Grants awarded to a student, doubling them and making it retroactive and would be easy to administer because the government already has all the information it needs.

More fundamentally we need to start addressing the problem of runaway college expenses or we’ll end up in this same situation 10 or 20 years down the road.

We should stop sending billions in government loans and grants — the functional equivalent of school vouchers for higher ed — to predatory, for-profit colleges that leave students with mountains of debt and degrees that aren’t worth what they paid.

Instead we should invest that money directly into rebuilding a system of low-cost public colleges and universities, especially community colleges.

We don’t have to look far for a model. The Salt Lake Community College Promise program offers free college tuition to students eligible for Pell Grants. It’s not a new idea, and it is currently in place in more than 200 schools nationwide.

It provides a pathway to higher education for students who might otherwise not have access, improves economic mobility and helps build a skilled workforce.

The Biden administration had proposed such a plan but scrapped it after Republicans complained it was too expensive. Meantime, at the state level, our investment in public colleges has slipped from 11% of the total budget to 9% in just six years.

We need to invest our resources in building accessible high-quality educational opportunities, crackdown on predatory for-profit schools and rethink our goals when it comes to higher education because in the modern world there’s a difference between having a $200,000 diploma and being smart.

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