Student debt weighs like an anchor on the lives of millions of Americans — even well after graduating college. With the costs of education and the resulting amount of debt, many graduates put off buying homes and starting families of their own. The burden is much greater on those for whom life circumstances, such as health emergencies, have interrupted their ability to pursue a degree, but the debt remains.
In my research, I’ve been taken aback by how pervasive this problem has become. Among the 43 million people in the U.S. with student loans for which President Biden’s student debt relief executive order targets, far too many families have been burdened substantially by these loans.
In 2003, student loans totaled $250 billion. By the year-end of 2021, that had skyrocketed to $1.75 trillion, propelled by the rising cost of education and the proliferation of “diploma mills” — for-profit institutions that offer an easy path to a degree but don’t increase the earnings potential of the student.
Student debt relief: Addressing the challenges ahead
While student loan growth has very recently begun to plateau as awareness of abuses has grown, the burden on millions is still significant.
Why should we care?
Now, more than ever, we’re competing on a world stage. If we truly want to reach a more robust level of economic growth and stave off global competition, the affordability and effectiveness of our educational institutions matter greatly. With so much of the rest of the world competing more effectively with us, we need to redouble our focus on this crucial area.
Yet even with this imperative, proposals to forgive even a portion of student debt have been received unfavorably by a significant portion of the population. The question largely revolves around fairness. Some reasonably ask whether it’s fair to forgive some debt when others in similar circumstances have sacrificed to pay that debt.
Biden’s executive order to forgive $10,000 in student loan debt for those making less than $125,000 ($20,000 for those who received Pell grants), represents a one-time adjustment to address the financial harms wrought by student loans — especially for low- and middle-income borrowers. More needs to be done, however, to crippling student debt.
To address the fairness question head-on, I propose that we introduce a new voluntary program that embraces debt forgiveness, but only if participants do substantial volunteer work for a qualified not-for-profit organization, along with making several consecutive years’ worth of student loan payments.
Specifically, if a student debt holder has made payments for 90 consecutive months, and has also done volunteer community service for an approved government or not-for-profit organization for 800 hours, then the remaining balance of that student’s loan would be forgiven by the government.
This proposal could be more palatable than any outright, across-the-board debt forgiveness program because the question of fairness inescapably and forcibly shapes the policy environment around student loans as even Biden’s one-time adjustment has proven. My policy approach would address the fairness issue by requiring a commitment from the borrower to make a meaningful, sustained contribution not only in the form of payments but also with time and labor in civic or charitable work.
Finding an equitable path to forgive a substantial portion of remaining student debt — what we might call debt amnesty, or “jubilee” — will boost the American economy, foster financial well-being, and help keep America competitive in a world where other nations have narrowed the gap with the U.S. in higher education attainment.
Richard Vague was co-founder, chairman, and CEO of Energy Plus, an electricity, and natural gas company. Vague was also co-founder and CEO of two banks and founder of the economic data service Tychos. He currently chairs The Governor’s Woods Foundation, a nonprofit philanthropic organization. His new book is The Case for a Debt Jubilee (Polity Press, Nov. 22, 2021). Learn more at richardvague.com.
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