The Washington Post Editorial Board took a critical look at Democratic presidential candidate Sen. Elizabeth Warren’s (D-MA) plan for solving the perceived crisis in higher education and determined that it “is not a sound idea.”
As the Post noted student loan debt currently stands at $1.5 trillion with an average of $23,000 per household. Warren’s plan would forgive up to $50,000 which by her plans calculations would eliminate it for 75 percent of families and partially eliminate it for 95 percent. This would apply to borrowers with household incomes of under $100,000, about 80 percent of the population with some relief for those earning up to $250,000. The cost would be $640 billion plus $600 billion or so for her free public college tuition for a ten year total of $1.25 trillion.
Even for a liberal newspaper, Warren’s plan was too much to swallow.
No one can accuse Ms. Warren of thinking small. What she really needs is a better sense of proportion. Her premise seems to be that student debt is all burden and no benefit, but this is not true: It represents an investment in skill acquisition that pays substantial long-term benefits. President Barack Obama’s Council of Economic Advisers estimated this lifetime “earnings premium” at about $1 million over a worker with only a high school education. It’s not unfair to expect people to pay back their loans out of that income. What might be unfair is debt relief to the exclusion of other priorities with wider benefits, including to people who did not go to college at all. Ms. Warren proposes a wealth tax to cover the cost, the proceeds of which would then not be available for alternative, possibly more progressive uses. In any case, default rates are actually falling slightly, according to the latest Education Department figures; 84.7 percent of borrowers were current on their obligations as of the end of 2017, according to the New York Fed.
As for tuition-free college, why should children of families in the upper reaches of the income distribution scale receive an income-enhancing state-university education for nothing, when their parents are perfectly capable of helping defray the cost?
The Post is all for the idea of reducing the stress of student loan debt but said that Warren has targeted the wrong group of people with her plan.
Student-loan defaults are concentrated among students who attended for-profit institutions, or who accumulated low loan balances but then dropped out and were stuck paying the money back out of lower-than-anticipated earnings. Such issues are hardest for students and families of color, as Ms. Warren correctly emphasized. This calls for a targeted approach that relieves the worst financial stress of those least able to handle it, not a sweeping bailout for the middle class and above.
What the Post and Warren have failed to address is how colleges and universities use the widespread availability of student loans to inflate tuition prices while giving students an education of dubious value in many cases and saddling them with unnecessary debt rather than offer lower tuition rates that wouldn’t require a loan to begin with.