The amount Americans owe on student loans recently surpassed total credit card debt and car loan debt. The astonishing $1.6 trillion Americans owe for their education is blamed for any number of societal scourges, including delayed child rearing, weak consumer spending, and low homeownership rates among young people.
More than 44 million Americans carry student loans. Growing numbers of people think higher education in the United States is woefully overpriced and that something needs to be done about it.
Sen. Bernie Sanders, the Vermont socialist senator and Democratic presidential candidate, believes he can make political hay from this sentiment.
Sanders proposes the federal government — i.e., taxpayers — simply pick up the $1.6 trillion tab and let debtors walk away from their obligations. Sanders suggests the tab can be paid with a tax on what he calls Wall Street “speculation.” What that really means is a massive tax on retirement and other forms of savings.
The truth is that there would be no way to pay for the college loan bailout without either raising a host of taxes immediately — and significantly — or with racking up huge amounts of public debt. Debt, contrary to Sanders’ promises, does not simply “disappear.” It just gets dumped on somebody else, notably including future generations already burdened with a dangerously unsustainable national debt.
The senator’s proposal is unlikely to become law, but it already is stirring up some furious public opposition.
There’s the simple issue of fairness. Sanders’ proposal would be a gift to the millions of Americans who carry student loan debt. But what about those Americans who worked hard — sometimes taking multiple jobs — to pay for their educations, and pay down their debts? Not only would bailing out those who still owe money be a slap in the face to those who worked hard to meet their obligations, they would also be taxed more to help fund Sanders’ proposal.
In other words, they would pay off their student loans twice: Once for themselves, and again for people they’ve never met.
Likewise, college graduates tend to earn more than those who did not attend. Therefore, hardworking non-college graduates would end up subsidizing the education of those who far out-earn them. How is that fair, critics ask?
Perhaps the oddest facet of Sanders’ plan is that it is only retroactive; it does not address future college costs, except that it calls for lower interest rates on future graduate student loans. But that means, presumably, post-bailout, tuition would continue to rise and debt would start piling up again.
As Kevin Carey, an education scholar at the New America think tank, pointed out, “the plan would create a generation of student loan lottery winners, with losers on either side. People who had already paid back their loans would get nothing. People with future loans would get nothing. People with debt on the day the legislation was enacted would be rewarded.”
— Colorado Springs (Colo.) Gazette