President-elect Joe Biden promised to forgive at least some student debt during his campaign, and he now supports immediately canceling $10,000 per borrower as part of COVID-19 relief measures.
Such proposals are likely to be quite popular. But there are those who question the idea of debt forgiveness and call it unfair to those who never took out student debt or already paid it off.
Should student debt be canceled?
Educational debt is often regarded as an investment in one’s future. Millennials with a bachelor’s degree, for instance, typically earn $25,000 more than those with a high school diploma.
Given the benefits of college education, canceling student debt appears to some as a giveaway for those who are already on their way to becoming well-off.
Canceling debt also seems to violate the moral principle of following through on one’s promises.
A borrower 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 unless mitigating circumstances arise.
Fairness and respect, however, also demand that society addresses the magnitude of student debt, and especially the burdens 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.
This explosion in student debt raises two significant moral concerns.
The first concern is that the distribution of costs and benefits is very 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 due to educational challenges and wage gaps.
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. Twenty years after college, when white borrowers have repaid 94% of their loans, the typical Black student has repaid only 5%.
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, due in no small part to continuing social and racial wage gaps. 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 life choices. Consider that even before the pandemic, 20% of student borrowers were behind on their payments, and first-generation borrowers and borrowers of color struggle even more.
The financial distress indicated by this high rate of delinquency is undermining both the physical and mental health of young adults. It prevents young adults from starting families, purchasing cars, renting or buying their own homes and even starting new businesses.
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 for them.
Moral hazard can be avoided by combining student debt cancellation with programs that reduce the need for future borrowing, especially for first-generation students, low-income students and students of color.
Ultimately, morality requires a forward-looking and a backward-looking approach to debt cancellation.
Kate Padgett Walsh is an associate professor of philosophy at Iowa State University. Distributed by The Associated Press.
