Students-Loan Forgiveness is a Bad Policy

The White House has begun a new round of the interminable discussion about whether or not to forgo student loans. Its self-imposed deadline for a decision is August 31, and some reports suggest the President is considering wiping out up to $10,000 in student-loan balances for those making up to $150,000 a year.

There are many ways that we can make it easier for students to repay college loans. For example, programs that tie repayments to income could be a good option. Conservatives must be careful not to show too much compassion. It is politically prudent and popular to hold a strong line against executive actions to cancel student loan debt.

It’s not difficult to find mainstream media narratives about hard-case stories, which make a pro-family case against student loan cancellation. Many journalists likely have six-figure journalism school debts. Profiles abound of recent graduates like Nick and Megan, who live in New York and have put off marriage until Megan’s student loans are paid off. Richard Williamson, who dropped out of college with about $19,000 in loans, told CNBC he likely would have married his wife and had kids sooner if it weren’t for the albatross of debt.

Some conservatives feel the same way. They worry that recent college graduates can’t afford to have kids or purchase homes due to loan debt. Some might be tempted to use executive action to remove barriers to fertility or marriage, and make the case for student-loan forgiveness.

But, they must resist the lure. Evidence shows student loan debt does not have a significant impact on marital rates and has no effect on chances of having children. It is worthwhile to make family life easier and more affordable, but this should not be achieved by eliminating debt from those who have pursued higher education.

As a paper one of us wrote for the Joint Economic Committee in 2021 shows, women with a large amount student debt tend to have somewhat lower rates of marriage–but that is likely driven by their choice to put off starting a family to pursue additional years of education in the first place. And the literature around student debt and fertility suggests even less of a relationship–a variety of studies suggest that for students who attend four-year colleges, “student loans are not significantly associated with the transition to parenthood.”

Reducing the cost of attaining a professional degree or Ph.D. would not make those women more likely to marry, whereas providing targeted support to married, pregnant, or parenting graduate students, like the University of Notre Dame has sought to do, would provide more meaningful assistance in juggling the responsibilities of scholarship and family life.

The evidence is overwhelming in favor of student loan forgiveness for families. The average student loan balance is higher than that of the typical borrower because a select few borrowers have accrued large balances. Graduate-program students have seen the fastest increase. The JEC paper showed that there was some evidence suggesting that the recent rise in fertility rates among graduate-program students may have been due to the increase of debt. However, the JEC report found little evidence of a reduction in fertility for those seeking doctoral degrees. As such, the JEC report suggests that the types of people who are interested may not be able to delay fertility until they become professionally established.

A Brookings study that found the five degrees responsible for the most student debt are MBA, J.D., B.A. B.S. in business. in nursing, and M.D., and that the top fifth of earners owe 35 percent of all student debt. Recent MBA and newly-minted lawyers may eat ramen noodles just to survive. However, a quick analysis of their financial position does not take into account their potential for much higher future earnings.

Colleges and universities have found a gullible demographic in people willing to take out an average of $77,000 in debt to get professional degrees in social work, counseling, and social health services. As American Compass’ Oren Cass pointed out, forgiving student debt without addressing structural incentives would only make the problem worse, setting a precedent for future handouts to the managerial class and the schools that cater to them.

There are solid reforms that we can pursue in order to reduce the burden on students loans. Many people who took out loans to go to fly-by-night schools, like Corinthian College, are truly deserving of compensation. Vicky Hartzler, a Missouri congresswoman has introduced a sensible bill that would eliminate the marriage penalty when student-loan interests are treated. Currently, single filers are allowed to deduct $2,500 in interest paid, while couples are limited to deducting the same amount. Doubling the allowable amount to $5,000 for married filers would remove a penalty in the tax code and give a little assistance to married couples with student-loan debt.

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Another solution is to streamline the income-driven repay process. This ties the household’s income and the amount owed. This program is a smart way to reduce the student loan burden on households with low and moderate incomes. They can be harsher with married couples, as a greater portion of income could mean that student loan repayments will take up more of the income. These issues could be solved by offering grace periods for newlyweds or providing more generous treatment for households with children.

But conservatives who attempt to defend student-loan forgiveness in a counterintuitive manner as a populist move are misguided. Conservatives who attended high-cost institutions of higher education may have a distorted sense of how common student-loan debt is–two-thirds of Millennials owe no student loan debt at all.

Only 20 percent of young adults end up more than 100 miles from where they grew up, and even fewer attend high-cost Ivy League schools or extortionate graduate programs. The better way to help would-be parents get married and have kids is to pursue policies that lower the cost of parenthood across the board, such as making housing more affordable. However, student loan forgiveness is best if you stand on principles. This will help young people from all walks of the life.