Student Debt is a Moral Problem. Always has been.

How we evaluate the ethics of the problem matters.

As the incoming Biden Administration faces a Senate that will, with near certainty, block any meaningful fiscal agenda, some on the left have called for doing a Very Big Thing via executive order: Cancellation of federal student loan debt.

The idea was not hatched this week, although you’d think so if you read only the professional commentariat. Serious scholarship on the institutional framework that both enables and sustains federal student lending precedes the discourse this week, which actually informs the moral call for its cancellation. See for example Luke Herrine’s law review article here, that explores this problem in rich, institutional detail. Or perhaps you prefer a macro paper that explores the impact of wholesale debt cancellation, if you’re looking for something more familiar to traditional economic policy impact modeling. For this you’d most certainly want to start with The Macroeconomics of Student Debt Cancellation, by Fulwiller, Kelton, Ruetschlin, and Steinbaum. Instead, you have people like Justin Wolfers who are seemingly birthed, ex nihilo, from The Brookings Institute for the sole purpose of reminding people that such ideas are childish, because they do not exist in their introductory textbooks.

Setting aside whether or not student debt cancellation is better or worse than other policies in terms of increasing effective demand, because frankly such a question is irrelevant for the moment (remember, we’re not getting any meaningful fiscal policy that doesn’t satisfy objectives of the GOP Senate), we can and should evaluate it on its own terms. The primary evaluative criteria for any public policy should be whether it makes peoples lives better or worse. This is an easy one: doing a student debt jubilee unambiguously improves peoples lives. Full stop. QED.

Let me say it a different way: we have a moral obligation to wipe the slate clean on student debt using every tool available to us, because we have failed an entire generation by allowing the public provision of higher education to whither away. This was a failure of public policy, not of individuals, and we must make it right as a public body. If there are legal methods to effect a jubilee and reset the clock on this, then there is moral urgency to act.

Doing this act of public policy is free in the economic sense. It does not come at the expense of an alternative policy, unless you admit that doing nothing is itself a positive policy comittment. And, in a cynical sense, it is. But, in evaluating this tradeoff we may move safely away from the sterility of the opportunity cost model where difficult questions of morality are waved away, and square with the problem on a battlefield where the morality of everyday people wins. Stanning the continuance of the existing situation just arbitrarily locks debtors in a place of unfreedom, which is a deeply immoral position to maintain. In the end this debt must and will be foregiven.

As Marshall Steinbaum writes in The Student Debt Crisis is a Crisis of Non-Repayment, it’s incumbent on policymakers to reckon with the inevitablity of cancellation, because it’s really a question of insolvency. These loans will not be repaid:

The policy question is then not whether to cancel student debt, but how? Are we going to rely on increasing IDR and thus kick the ball further into the future, ruining more and more lives as we do so [emphasis added], while still not actually collecting on the government’s loans and potentially imposing a large tax liability when the debt is finally cancelled? Or can we honestly confront and solve a past policy failure in the present by cancelling debt now (and not taxing it), to prevent the debt spiral from getting any worse and rectifying the damage student debt does to household wealth?

What emerges from this passage is an appeal to an ethical frame that asks us to center the experiences of borrowers whose lives are arbitrarily made worse by the continuance of an unjust, cruel and unsustainable system. It’s time to end this practice and the only thing standing in the way is a pen, desk and a gaggle of narrow-minded wonks who should have spent more time in graduate school thinking about humanity and its ethics.