The current argument over student debt: should the government forgive the first $10,000 in debt or the first $50,000 in debt, is a classic case of a political issue being whittled down to two choices, neither of which is very good, neither of which address root cause. Although I am inclined to think that forgiving $50,000 in debt is five times worse than forgiving $10,000.

I do not pine for the United States circa 1950’s that MAGA folks seek. I am, however, quick to admit that our nation was doing very well by one particular group of people—straight white males—during that period. And the likeliest route to becoming an equitable society in the 2020’s might very well be to offer the kind of programs that led to living wages, increased home ownership, and access to higher education for white men in the 1950’s and 60’s to: everyone!

Between the GI Bill and the 1970’s, colleges and universities offered higher education to more people than ever before. The United States became the world’s education leader by investing in two important ways. First, the government funded public universities, which helped keep tuition reasonable. Second, the government established loan programs to provide deferred-interest loans to individual students at low rates.

I was a direct beneficiary of the second approach. The ‘financial-aid package’ for a kid from a low-quartile income family included scholarship, required work-study, and loans. After four years of college I owned a whopping $11,000 (real money in 1977). However, the interest on that debt did not even begin to accrue until after my VISTA service and graduate school. Even then, the 3% interest rate made repayment feasible without inhibiting my ability to undertake the major financial obligations many of us acquire in our thirties: start a family and purchase a house.

The investments that my government made in me paid handsome dividends. I got a great education, did useful work, and made a good salary. In exchange, I paid the US government steady taxes for four decades. A win-win all around.

In the 1980’s, the mantra of small government took hold, and privatization became the norm. Instead of the government making direct loans (which required actually allocating money in the budget), banks could make student loans, and the government would insure them. A win-win for the banks (whose loans were guaranteed), and the government (which lowered its balance sheet—at least until delinquent loans came due). But a losing proposition for students, who now paid higher interest which accrued from the borrow date.

A brief example. Under the system that nourished me, eight years after I borrowed $1000 as a first semester freshman, I had to begin making payments on that $1000 at 3%. After we moved to a bank-led system, that $1000 had already ballooned to $1700 by the time a student finished graduate school, and she had to pay 6 % or 7% interest on that inflated base amount.

Meanwhile, our government collectively disinvested in higher education. Over twenty-five years, the dollar amount of state funding of public universities actually dropped, while the cost of tuition soared beyond inflation. As college borrowing became the norm, the cost became price insensitive. Humans are less price-conscious of anything we buy on credit rather than purchase outright. The more we became accustomed to borrowing large amounts to pay for education, the less we scrutinized the cost.

Today, students today borrow more money, at higher interest, for an education whose benefits, whether measured by general enlightenment or earning potential, is smaller than a generation ago. Shouldn’t we just forgive them their debt?

NO…

• Because it sends the wrong signal: that if you get deep enough in debt you will be bailed out.

• Because it is patently unfair to prudent people who avoid excessive debt.

• Because it benefits banks more than people.

AND YET…

The debt load students bear today is untenable, even predatory. They deserve relief.

SO, WHAT TO DO…

Debt forgiveness is not the answer. Relief should come from our government acknowledging that it is in everyone’s best interests to invest in higher education. The government should reinstitute deferred, low-interest loan programs, own the cost on our balance sheet, transfer the first $50,000 of every student’s debt to these programs, and make the program available to future students.

This will be much harder to slogan into a sales pitch. It will much harder to implement than a simple loan forgiveness program. But if we are serious about student debt, this is the kind of balanced program we need: provide across the board relief while maintaining proportional responsibility for the debt students have incurred.