Revised student loan debt relief


As I write this column, House Speaker Pelosi, Senate Minority Leader Schumer, and President-elect Biden have been speaking again about student loan debt relief for the past two weeks. As a result, the question is ubiquitous in the media with detailed discussions about the pros and cons of forgiveness, as well as the potential level of forgiveness that would be appropriate for each person.

We discussed this topic at length in a series of columns a few years ago when I was vacationing interviewing Americans from all over the country and of diverse backgrounds at a resort. We also updated some of these discussions when topics such as whether student loans should be deductible in bankruptcy became widely discussed in the media.

Before we do that, let’s briefly review a few other current issues.

$ The Dow and S&P stock indices hit record highs last week, and a report claimed November performance was the best in 33 years. We recently suggested a couple of Christmas presents. A Christmas present has always been the gift of stocks, which hopefully increases in value. For some families it has also been a way to encourage children and grandchildren to invest and teach them how investing really works. It is definitely something to consider.

$ The first doses of the Covid-19 Pfizer vaccine are due to arrive in New York state this week by December 15, which finally makes the light at the end of the tunnel seem real. In the meantime, I had a disturbing experience this week as we tried to flatten the curve and stop the alarmingly widening spread. When I wanted to fill up with gasoline at BJ’s in Henrietta, I was the only one who pumped gasoline with a mask. In April and May everyone wore a mask. Yes, it’s outside, and we may have learned a few things since then, but it’s worse, not better. It worries me about the holidays.

Let’s turn to some of the topics discussed in the context of student loan debt relief. I wonder where you are

– That’s a new argument for me. Those who advocate forgiveness claim that many of the mistakes made with priceless student loan debt were made by students who were only 17 or 18 years old. How could you have known better? My answer is, why did their families allow them to make these mistakes? After these families determined that college was indeed right for them and selected an institution where they could get the best value for every dollar they spend or borrow on their education, they did not explain that if it were you? Take out student loans, are these debts a bet on future income and should they make a good one? Didn’t they make sure this student analyzed the degree they were aiming for, including job opportunities and average salaries, to ensure that their student loan debt is affordable by the time they graduate and get the job they get that education for? Didn’t they also make sure that the student completes their degree on time to minimize debt?

If debts are simply canceled, won’t it create moral hazard for families in the future? Why should they do all of these critical things when they think the government will simply forgive all or a significant portion of the state-guaranteed student loan debt?

– Those who oppose student loan debt forgiveness say that in some ways it is only about treating a symptom, not the disease. This disease is the egregious increase in the cost of a college education, over 3,000% since 1969. As far as I know, nothing else in our world has increased that much. We discussed many of the reasons, including the National Student Loan program, which simply throws money on educational institutions for no accountability; the increasing convenience families need; and the war of prestige that results in many programs being offered that do not improve the education of many students, if one does a cost-benefit analysis. Then there is the explosion in the administrator-student ratio compared to the 1960s.

Those who oppose student loan debt relief say it will only add to another moral hazard. It does not encourage colleges and universities to be more efficient and effective in providing their services. In fact, it can encourage them to keep increasing tuition fees.

Of course, if some forgiveness got their way, college education would be free or very inexpensive for all or some, depending on family income, but that doesn’t blame colleges and universities for being more efficient and effectively. It would just mean that whether or not they were efficient and effective, taxpayers would bear the cost. I admit that some advocates of forgiveness speak of asking colleges to do a better job of making sure students graduate on time for their particular program, but I haven’t heard how they would ensure college costs she has to pay for each one less.

– Another argument from forgiveness advocates that is new to me is that it would boost the economy at a time when the pandemic has paralyzed it. Advocates against forgiveness say there are much better and more direct ways to stimulate the economy with the dollars that would be spent on forgiveness, such as direct payments to more Americans. In this context, it’s important to remember that forgiveness just means that the owners don’t have to pay their otherwise monthly payments over time. It would not mean that the amount allocated would immediately flow into the economy.

In the next column, we’ll look at more of these arguments for and against student loan debt relief.

By the time this column comes out, we may have a new and welcomed Pandemic Boost Bill, although technically many of the provisions may not be a “suggestion”.

John Ninfo is a retired bankruptcy judge and founder of the National CARE Financial Literacy Program. For his previous weekly columns, see


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