President Joe Biden’s plan to forgive $10,000 to $20,000 of student debt for up to 40 million borrowers was recently put on hold by a federal appeals court.
Six states had asked the court to block the implementation of loan forgiveness until their lawsuits against the program were resolved. The states allege that they would be financially harmed if borrowers receive loan forgiveness.
As an ethicist who studies the morality of debt, my work explores the question at the heart of opposition to student loan forgiveness: Is student debt cancellation unfair?
Educational debt is often regarded as an investment in one’s future. Millennials with a Bachelor of Arts degree, for instance, typically earn $25,000 more per year than those with just a high school diploma.
Given the benefits of college education, canceling student debt appears to some as a giveaway for those who are on the way to becoming well-off.
Canceling debt also seems to violate the moral principle of following through on one’s promises.
A student signs a promissory note agreeing to pay back the government and, ultimately, the taxpayers. And so student borrowers seem to have a moral duty to pay their debts.
Fairness and respect, however, also demand that society address the magnitude of student debt today, and especially the burden it imposes on low-income, first-generation and Black borrowers.
Young people today start their adult lives burdened with much more student debt than previous generations. Almost 70% of college students now borrow to attend college, and the average size of their debt has risen since the mid-1990s from less than $13,000 to about $30,000 today.
This explosion in student debt raises two significant moral concerns.
The first concern is that the distribution of costs and benefits is highly unequal. Fairness requires equal opportunity. Yet, while borrowing for education is supposed to create opportunities for students from disadvantaged backgrounds, those opportunities often fail to materialize.
Data shows that low-income students, first-generation students and Black students face much greater struggles in repaying their loans. About 70% of those in default are first-generation students, and 40% come from low-income backgrounds.
These repayment and default rates reflect significantly lower graduation rates for students in those groups, who typically need to work long hours while also in school.
But they also reflect significantly lower post-graduation incomes for such students. Black men with a bachelor’s degree make, on average, more than 20% less than white men with the same education and experience, though that wage gap is smaller for women. And first-generation graduates typically make 10% less than students whose parents graduated from college.
A second moral concern is that student debt is increasingly causing widespread distress and constraining the lives of borrowers. Even before the pandemic, 20% of student borrowers were behind on payments.
Some analysts have argued, however, that canceling student debt will create a problem of moral hazard. A moral hazard arises when people no longer feel the need to make careful choices because they expect others to cover the risk.
Moral hazard can be avoided by combining student debt cancellation with programs that reduce the need for future borrowing.
One success story is the Tennessee Promise, enacted in 2015 to make tuition at community and technical colleges free to state residents. It has increased enrollment and retention and completion rates while reducing borrowing by over 25%. (Rhode Island has a similar program at the Community College of Rhode Island.)
The way forward is to create a fairer society by canceling some student debt and reversing the trend of funding higher education with borrowing.
Kate Padgett Walsh is an associate professor of philosophy at Iowa State University. Distributed by The Associated Press.