The fairness of college debt forgiveness

On April 21st, I published a blog post arguing that educational debt forgiveness is largely untenable, even ignoring the cost. As it happened, I had already written the post when presidential candidate Elizabeth Warren announced large-scale debt forgiveness as a major part of her platform. There are myriad problems with debt forgiveness but the most serious pertain to fairness. Forgiving college debt on the basis of income, as Warren proposes, clearly provides disproportionate benefit to wealthier people.

Shortly after Warren’s announcement, the non-partisan Brookings Institute published its own analysis of the plan. Brookings’ report concluded that the top 20% of households by earnings would reap 27% of the benefits of Warren’s plan. The top 40% of households would receive 66% of the benefits. The author of the study succinctly poses the most problematic element of the equity of debt forgiveness:

“any student-loan debt relief proposal needs first to confront a simple question: Why are those who went to college more deserving of aid than those who didn’t? More than 90 percent of children from the highest-income families have attended college by age 22 versus 35 percent from the lowest-income families.”

Ultimately, college debt forgiveness amounts to a regressive tax, with higher earners receiving disproportionate benefits and paying less than households with lower incomes.

In response to Brookings’ analysis, an adviser to Warren’s campaign wrote an opinion piece in The Guardian. The Guardian piece argues that debt forgiveness would be available to all, like national parks and public K-12 schools, and that opposition to Warren’s plan is akin to opposing public funding for these programs:

“The logic of the critics’ position is that public investments in programs that help everyone, including middle- and upper-class people, aren’t progressive. This means that the critics would have to oppose public parks and public K-12 education, public swimming pools and public basketball courts, even public libraries….On the critics’ theory, these are all not progressive because middle-class people benefit – and in some cases might benefit more than poor and working-class people from their use.”

This argument is economically flawed. Everyone may obtain equal benefit from access to these programs. Warren’s plan is like funding public parks and libraries that are only available to those who have attended college. Not everyone uses the public library and it is entirely possible that public libraries are used disproportionately by better-educated (and, therefore, mostly wealthier) people. The key, however, is that access is available to all. College debt forgiveness is essentially guaranteed to provide disproportionate benefit to wealthier households. That is what makes it bad policy, even ignoring the $640 Billion price tag.