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August 12 2019

How the Promise of College Loan Debt Forgiveness Will Distort Choices

by Charlotte Hays

Quote of the Day:

If I knew I wouldn’t have to pay my debt, I’d have chosen a more interesting major and a better school.

--Ethan Ames in today Wall Street Journal

Part of the college experience is figuring out where to go to school and how to pay for it.

Senator Elizabeth Warren and Senator Bernie Sanders both have plans to wipe out the college loan debt of people who've made choices their subsequent financial states don't justify. 

In an op-ed headlined “Bernie Sanders and Elizabeth Warren Will Never Forgive Me,” Ethan Ames, a former PriceWaterhouseCoopers employee, now a law student at the University of Chicago, explains how knowing your debts will be forgiven would distort choices.  

The burden of student loan debt, undertaken at an early age, can be devastating, but Ames explains how cancelation sends the wrong message by talking about his own choices.

Ames ruled out going to Denison University because he deemed it too expensive. Instead, he spent his freshman semester at the University of South Caroline—he seems to have liked it there but the price tag was $19,714 for tuition, room, and board—the price, he wryly notes, of a Honda Civic. Ames transferred to the University of Toledo, closer to home, and studied accounting:

Accounting isn’t my passion, but like a Honda Civic it’s safe and reliable. 

After graduating from college, Ames was hired by PriceWaterhouseCoopers. What if he had known that he would never be responsible for his college debt? Well, he would have made different choices:

If I could have borrowed without limit to pay for my education because the loans would later be forgiven, this wouldn’t have been my path. I wouldn’t have majored in accounting, transferred to Toledo, or even attended South Carolina. I would have attended a pricey private school on Uncle Sam’s dime and majored in political science—a subject I might have found more engaging if less remunerative.

Let’s say that a Democrat is elected president in 2020 and forgives most or all student loan debt, as Elizabeth Warren and Bernie Sanders have proposed. Will the government also change the name of the school on my diploma to Denison University, which I would have attended had my degree been free of cost? Will it compensate me for the intellectual fulfillment I lost out on by taking a course in accounting information systems rather than the politics of sub-Saharan Africa?

The answer to both questions is obviously no, which reveals the greatest flaw in plans to forgive student loans: Like all ex post facto policies, they would punish or reward people for decisions made based on laws and information available at the time, while casting an air of uncertainty over present decisions.

To be sure, many Americans with student-loan debt struggle to service it and must make difficult decisions to stay afloat. Many other Americans, however, avoided these challenges by making difficult decisions about the cost of education while still in school. They chose to work more hours to avoid additional debt. Or they chose, like me, to attend a less expensive school or get a degree in a subject providing a safer path to repayment.

Comprehensive debt forgiveness would create a strong incentive for current and future students to make riskier borrowing decisions.

Ames notes that there may be young people who will make riskier choices just on the possibility that we will have a Democratic administration next time.

College loan debt forgiveness promises to eliminate the consequences of our own decisions.

It lessens the burden of culpability for those adults who told kids that you can’t make it without a pricey degree and then encouraged them to undertake serious debt to get that degree.

Why not encourage students to make better choices, to perhaps attend a less expensive school, or even to explore an alternative in a field that doesn’t require a bachelor’s degree?

College loan forgivenessisn't free. It would cost the taxpayer, some of whom are not college grads, a bundle. 

Another unfairness Ames points out: the Sanders plan would forgive the entire $200,000 debt of a student who had gone to an Ivy League school.

I don’t know about you, but if I am going to chip in to send somebody to a fancy college, I’d prefer it to be a relative or somebody I know is worthy.





Independent Women's Forum is an educational 501(c)(3) dedicated to developing and advancing policies that aren’t just well intended, but actually enhance people’s freedom, choices, and opportunities. IWF is the sister organization of the Independent Women’s Voice.​
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