The Great Debt Debate


There’s nothing like a heavily disputed presidential primary season to bring exciting new ideas out into the open, and there’s nothing like new ideas to generate debate (or if you’re on the internet, scorn and abuse). One of the big ideas being tossed around among Democratic presidential hopefuls is the idea of alleviating some or all student loan debt. Whose, how much, and how are all part of the mix, and of course the ever-present “why?” raises its head in the discussion, particularly when the question makes its way outside the narrow corridor of progressive thought.

In a lot of ways I feel like I’ve had this discussion before, on any number of topics, pretty much anytime the subject of government intervention in the economy (or any kind of government spending really) comes up. The simple fact is that government spending exists for a lot of reasons, but it always has one of a few intentions:

  • Providing basic services. This one seems kind of obvious, but it doesn’t cover nearly as much ground as most people think it does. That’s because there’s a significant amount of ground between what you want and what you need. We’ve become accustomed to a government that provides an awful lot of wants in addition to a scant handful of needs. This is not intended to be a polemic against government providing those things, merely pointing out that there is a difference between the two. This also goes hand in hand with…
  • Making a moral statement. You might not think something as dry as taxation and spending would have moral implications, but boy would you be wrong. Consider the phrase “provide for the common weal”. What exactly does that mean? What does it cover? And how do you intend to collect the money to pay for it? Once you figure that out, you’ve taken a moral stance, and your budget and taxation priorities will reflect that stance.
  • Stimulating the economy (whether it’s effective or not). I’m going to be generous and pretend that every time politicians have said that their various taxation and budgetary maneuvers were intended to “stimulate the economy” they were being sincere, regardless of the actual outcome of those efforts.

    Please stop laughing at me.

 

So where does that leave us when considering the idea of relieving student debt? Well, a lot of that is going to depend on how you feel about it coming in. As Obi-Wan once said, “you’re going to find that many of the truths we cling to depend greatly on our own point of view.” Do you consider college to be a basic service? If so, then government should have been providing it all along, and of course people shouldn’t have to pay for it, either in the past or in the future. Pay off ALL the loans and make all public colleges free. Perhaps you believe this is a matter of economic justice, in which case something more akin to Elizabeth Warren’s plan is more to your taste, with only a certain amount of debt being paid off, and an income cut-off being involved to ensure it’s more progressive than regressive. Or maybe you’re interested in stimulating the economy, in which case you want something a bit more modest but even-handed.

Or perhaps your stance leans more the other way. I have heard arguments asking why student loan debt should be privileged over other kinds of consumer debt, such as mortgage debt or credit card debt. These are important questions, and worth addressing by those who would forgive or pay-off student loan debt. I have a few answers of my own, although not sufficient answers I am sure for those who are asking those questions.

Regarding comparisons to mortgage debt, mortgages have been privileged over other kinds of consumer debt for as long as the modern income tax has existed. Last I checked I couldn’t deduct my credit card interest or my rent payments from my income taxes, and while I can deduct the interest from my student loans from my income taxes, there’s one big difference on those that I’ll get to in just a moment. So suggesting that relieving student debt would be an anomaly because we would be “privileging” one particular kind of debt is disingenuous at best. While there’s a fair argument to be made that the price of the mortgage deduction has already been “baked in” to the price of housing, the same can be said for the price of tuition, with the cost of public four-year institutions increasing 213% in 10 years. I’d like to flip that house.

As for credit card debt, that’s a tougher lift. Despite the calls to limit interest rates at 15%, I haven’t heard any suggestion of relieving existing debts, nor do I seriously expect there to be any suggestion for that happening either (nor do I think such a suggestion would get any traction). Going back to needs and wants, there is an understanding in America today that you need a college degree; despite the realities that many Americans face of having to get by week to week using any means at their disposal, including high-interest credit cards, there is still a Puritanical moralism that says credit card debt represents wants. Regardless, though it has been made significantly more difficult in recent decades, there is still an option available to credit card debtors that is not available to student loan debtors: bankruptcy. Yes, it’s an ugly word in America. Yes, it will ruin your credit rating. But it sure does beat insurmountable debts. At least it does if it applies to the insurmountable debts you have.

I am not unsympathetic to any of these positions. I am a renter, and I have been a home owner. I have dug myself out of the bottom of a very deep hole of credit card debt more than once, and I know how awful it can be. Worst of all, I have carried substantial college loan debt for a quarter of a century, and every time I make a payment I am reminded of all the stupid choices I made that got me into that debt. I own those choices, I do not deny it. And I have been paying for them for over twenty years. It is not something I would wish on another human being.

The best answer I can give, ultimately, is the same answer I have always given when it comes to government policy or societal action: someone’s gotta take it in the shorts. It may not be “politic”, but it is absolutely egalitarian. It is the recognition that in a cooperative society, there are only two ways to manage things: everybody goes it alone, in which case the winners and losers make themselves, or we do things cooperatively, in which case we collectively make winners and losers. Either way somebody takes it in the shorts. There is no scenario in which everybody comes out ahead, but there are many scenarios in which everybody is worse off. The question we have to answer is which scenario we choose to pursue, and who ends up taking it in the shorts.

Anybody who says the student loan industry is getting it right is someone who is profiting off college students. And it’s not just teenagers. Veterans, working professionals, career switchers, stay at home parents returning to the workforce; these are all people who are trying to navigate a complex and often predatory environment, and they don’t have decades before retirement to pay back overwhelming loans. I’m not advocating any particular approach, I’m saying a conversation needs to be had now before the bubble bursts and it’s too late for a conversation, and all that’s left is to try to clean up the B.S.


My Cassandra Moment


“You are not going to believe this.”

-Cassandra

The other day I had my first “Cassandra moment”. For those of you who aren’t familiar with the myth, Cassandra was a figure from Greek mythology who was cursed to know the future and never be believed by anyone she told (seriously, that’s the shortest version I can manage. They all get weirder from there.) This has been used as the basis for the Cassandra metaphor, which you may know from the film 12 Monkeys (and if you don’t know that film I banish you until you do).

Are we all on the same page now? Good. So anyway, I was listening to the news and I noticed that I was hearing a lot of politicians and reporters talking about two things in very close proximity to each other: the fact that a high school diploma isn’t enough to get a “good job” anymore and the crushing weight of student debt. Setting aside any discussions about what exactly qualifies as a “good job”, it occurred to me this might not be a coincidence. There are a couple different historical trends that seem to be colliding here, and not in a way that I am at all comfortable with.

The first is this question of what level of education a person “needs”. Now I’m a big fan of education, and I will be the first to say that requiring universal basic literacy and numeracy has done wonders for our country. The marginal return on universal education beyond that point is something we can debate, as well as the shape it should take, but considering that debate is already happening all the way through the high school level I find it curious that there has been a not-so-subtle linguistic shift over the past few decades. It used to be that “every child should finish high school”. Then the norm became that “every child that qualifies should be able to go to college.” Next up was “every child that wants to should be able to go to college.” Now we’re moving into the realm of ‘every child should go to college.”

Notice that shift? The norm used to be a high school diploma, full stop. Now we’ve moved the goal post to “go to college”, no qualifiers. When does that become “Bachelor’s degree” or more? That brings me to my second point.

How exactly did we manage to get “every child into college”? Student loans. Not a big deal really, since the job market was always growing, opportunity was always on the rise, and that would never change. Except of course that it did change, and now we have a generation mired in debt. Nobody’s fault, really, at least that’s what the politicians tell themselves and their constituents. Certainly not the fault of programs guaranteed to extend credit to students to pursue programs regardless of their likelihood of graduation or securing gainful employment when they graduate – but I digress.

So here we find ourselves, pushing to send more kids, all the kids really, to college, while insisting there’s no way that anyone can afford to go to college. If only there was a historical example we could look back on, something remarkably similar in terms of a formerly non-compulsory, primarily private form of education that had become dominated by government influence….

And all sarcasm aside, that’s where I found myself this weekend, with a horrifying new theory and nobody to believe it. I explained it to My Not So Humble Wife, how I saw the government (probably led by the federal Department of Education, possibly with the states taking a strong hand as they do in the current public education system) taking over university education in the next 20 years and making it compulsory up through at least an Associate’s degree and far more likely through a Bachelor’s degree. After all, it’s much easier to soak taxpayers across the board directly to support the schools than to expect students to pay their own way, and then we can make sure everyone has the same “fair” chance (if you really believe the current educational system is fair, kudos on your naiveté.)

She doesn’t believe me. Neither do my friends who I mentioned it to. Maybe they all think I’ve been watching too much House of Cards. (Not true, I haven’t had a chance to stream season 2 yet). Maybe they think I’m just a nutjob libertarian. (True but irrelevant.) Maybe they just think I’m jumping at shadows. (Never; too much exertion.)

Whatever the reason, they don’t believe me, and chances are neither will you. But that’s okay. Just like the original Cassandra, I’m going to make my prediction, and the future will reveal itself in time.