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The Ethics of Cancelling Student Loan Debt

image of graduation cap icon filled with shiny coins

Since Joe Biden’s election, the public has been waiting to see how the new administration plans to tackle one of the biggest campaign issues: student debt. Biden’s platform contained some measures for debt relief for students, and he has pledged $10,000 in student loan forgiveness. However, that promise has not sat well with members of his own party, including Representative Alexandria Ocasio-Cortez and even Senate Majority Leader Schumer, who have called on the president to forgive a much greater amount of student debt. This debate over differing policy proposals has exposed a number of moral issues and concerns regarding debt forgiveness.

It is estimated that about 65% of all jobs in the United States require a post-secondary degree. About 43 million people owe 1.6 trillion dollars in federal student loans. The amount of debt has skyrocketed by over 600% since 2004 following years of rising costs of education. Student loans are now the second largest form of household debt after mortgages. Following the Great Recession, it has become more difficult to pay off greater amounts of debt. More than 30% of student loan borrowers are in default, and that number has increased steadily compared to default rates in the 1990s. Now with the pandemic, it is likely to become even more difficult for recent graduates to be able to find work and pay down their loans.

Part of the problem with this massive amount of student loan debt is that it has a larger social impact. Students who take on debt are more likely to put off larger purchases later in life. Millennials, who have the lowest credit scores of any generation, are reportedly more likely to delay life decisions that can affect debt such as having children, getting married, or buying a house. Many who struggle to pay also experience significant mental health problems. With less disposable income, this can create a drag on the economy which means that the issue affects everyone, not just students. This has led many to call the debt issue a crisis. As Daniel M. Johnson of the Harvard Business Review reports, “By almost any definition, this is a crisis: It is certainly a crisis for those with student loan debt…it is also a crisis for lenders…a crisis for the federation government…[and] many argue that it is also a crisis for our nation’s economy.”

This brings us to the various proposals made to ameliorate the problem. In addition to Biden’s pledge to cancel $10,000 per person as a response to the COVID crisis, Biden has also taken steps to pause loan payments until October. His Democratic colleagues have called for him to cancel $50,000 of debt per person using the Higher Education Act of 1965. (Biden’s initial opposition to this proposal was that based on not having the authority to do so without Congress.) However, several experts, including 17 state Attorney’s General believe otherwise and have called on Biden to act (Biden has referred the matter to the DOJ). More recently, Biden has shifted his opposition to the proposal on the grounds that not everyone deserves the relief, recently arguing that people who went to Harvard, Yale, and Pennsylvania do not need that kind of relief.

Indeed, one of the arguments against cancelling student debt is that it rewards people who will be better off and earn more with their degree. People with at least a bachelor’s degree are on average going to earn over $25,000 per year more than someone with a high school diploma (a PhD holder will earn $59,000 more per year). So, the argument goes, why should taxpayers, particularly those who did not attempt post-secondary education, be on the hook for other people’s debts, particularly if they are likely to earn more money anyways?

Of course, if there is one thing that the pandemic should teach us it is that things that might not obviously affect us can eventually have a huge impact on everyone. Despite their qualifications, grads often settle for lower paying jobs in order to start paying off their debt faster. Large debts also disincentivize many from pursuing higher education at all. A sluggish economy post-COVID will also exacerbate the issue of finding employment. If student debt continues to be a problem, it could be a source of economic drag, eventually limiting the revenue from future taxpayers.

According to Kate Padgett Walsh of Iowa State University, another argument against debt forgiveness is that it would seem to violate the Kantian deontological moral principle that one should keep their promises. Reneging on such promises is disrespectful to you and to others. On the other hand, one doesn’t renege on a promise if the promisee is released from the promise from the promisor. Also, it is in the nature of Kant’s moral thinking to disregard consequences and context for the sake of universality. The massive surge in debt, the potential risk to the economy, and the state of things following COVID become irrelevant to a Kantian moral take on the situation. The moral question then remains for us whether they should be relevant.

There are additional moral issues pertaining to justice and equity which are pertinent as well. Studies have shown that Black and brown Americans face a racial pay gap, and will likely owe more debt, meaning that it is more difficult for them to service their debt. According to Elissa Nadworny of NPR, “Many Black and Latino families have missed out on ways to build wealth in the past…due to racist policies. Researchers who study and talk to student loan borrowers say student debt is a primary factor holding them back now.”

This is in addition to, as mentioned, the physical and mental health issues that having so much debt can have. However, even if we accept that there should be some debt relief, there is still the question of how much. While some may argue that $10,000 is not sufficient, the facts suggest that not only is a significant amount of student debt less than $10,000, but that these are the loans which are most difficult to pay off. For example, many of these people went to college but did not finish. Thus, not only do they now owe money, but they likely make less than they would have. Meanwhile, more than a third of student debt is owed by the top 20% of income holders. This suggests $10,000 of forgiveness may have a more significant impact than cancelling another $40,000 on top of it. Thus, the problem may be that many will receive relief but not need it. There are several of these factors which affect the relative equity provided by each debt relief figure, and this makes the argument between $10,000 and $50,000 more complicated than it may first appear.

There is also the larger moral concern about tackling the cost of post-secondary education in the first place. This includes education cuts, rising tuition in public schools, as well as the growth of private schools which have resulted in a higher average debt burden. While debt relief may be a treatment, it doesn’t address the underlying sickness. Given that more jobs than ever require post-secondary education, and as a result enrollment has also skyrocketed, perhaps we should recognize that access to post-secondary education is a social need, and that the current university system as a whole, created and developed as it was before such need was felt, needs to be rethought.

Digital Textbooks in Higher Education

photograph of neon "Open" and "Textbooks" signs in window

On July 16th, one of the largest publishers of college textbooks in the world announced it will soon switch to a ‘digital-first’ publication structure that will prioritize the majority of its 1500-title catalog within a new subscription-based online portal. Once finalized, Pearson’s shift will aim to bypass the long-developed secondary market for college textbooks in a manner that has been compared to the successful capture by Netflix, Hulu, and other streaming services of once-thriving DVD resales.

For years, college students have raised concerns about the exorbitantly high-priced textbook market. Over the last decade, textbook prices have risen four times faster than the rate of inflation, often costing students hundreds of dollars each semester. A report published in September 2018 indicated that more than two in five college students had chosen to skip meals at some point in the semester so that they might afford textbooks. With university costs already playing a significant role in the current presidential election cycle (several Democratic candidates, such as Elizabeth Warren and Bernie Sanders, have made their positions on higher education a central part of their messaging), it makes sense that textbook publishers like Pearson would want to be proactive in seeking a solution.

As costs have risen, a variety of practices have already developed to try and make course materials more accessible for students, such as the purchasing of used and resold copies of older textbook versions on the secondary market – as well as the growing practice of digital piracy for assigned course materials. In recent years, various methods have been tried to curb illegal textbook downloading, from requiring digital keys to access online materials, integrating scannable “approval seals” that can be tracked by publishing houses, and working with institutions to develop ‘custom’ textbooks for particular courses. One proposal, institutional licensing, aims to offload responsibility for digital textbook distribution to universities; publishers would collect an up-front fee from the college, who would then be able to make the textbooks available to particular students. Perhaps the most successful endeavor for maintaining publisher profits thus far, however, has been the rise of the textbook rental market – though this comes with a variety of problems of its own.

On the other hand, students and activists have proposed a variety of measures to benefit students more directly, including the promotion of buy-back programs, calls for ‘open textbooks’ published under fair-use restrictions (click here for an example of one such textbook), and protective legislation like the Affordable College Textbook Act. Although Congress has repeatedly earmarked temporary funding to encourage the adoption of open textbooks, the ACTA aims to establish permanent programs and reports to track and combat high textbook prices, as well as to strengthen transparency requirements for textbook prices when students register for classes. Though it has been introduced repeatedly since 2013, the ACTA has not yet been put to a vote.

It remains to be seen, then, what Pearson’s subscription-based model will do for struggling students. In some ways, lowering up-front prices via a simple catalog subscription model may end up lowering costs for students overall (especially if such a product can be bundled or administered at an institutional level). Certainly, a digital-first structure will make it far easier for Pearson to update textbooks to new editions. Additionally, the lowered environmental costs of promoting ebook usage on a wider scale are a significant factor to weigh in this debate as well.

However, even if initial costs are lower (digital copies of textbooks are typically less expensive than printed versions), because students will have no option to resell their unwanted used textbooks at the end of their classes, overall costs for students may actually rise. Certainly, requiring subscription access to Pearson’s database will not only preclude textbook resales, but it will prevent several other tricky techniques for keeping student fees low – such as professors intentionally assigning older, less-expensive, versions of newly-updated textbooks. 

In a wider sense, Pearson’s subscription model is simply consistent with moves already familiar in the digital entertainment space, as well as for professional-based software products like Microsoft Office and the Adobe suite. As access-based consumption has become industry-standard for music labels and movie studios, it may only be a matter of time before book publishers follow suit. This will continue to bring to the fore important philosophical points about what it truly means to ‘own’ an ebook (as well as other concerns about censorship, for better and for worse), even if regular users of streaming services like Spotify and Netflix are less concerned about such murky questions than they are about simply being able to load up needed content on-demand. 

Of course, this is all without mentioning the potentially detrimental effect that ebooks have on reading comprehension – a particularly pernicious possibility for educational reading materials.

There is much that the age of the internet has changed about how we access information; it remains to be seen whether converting textbook access to a streaming-subscription model will be a Netflix-level success or not.

Blame and Forgiveness in Student Loan Debt

photograph of campus quad with students

US Senator and presidential hopeful Elizabeth Warren has recently proposed a pair of debt relief efforts that aim to address the growing problem of student loan debt in America. The first proposal would cancel “$50,000 in student loan debt for every person with household income under $100,000” (with lesser reductions for those with higher household incomes), while the second aims to help prevent student loan debts from becoming a problem again in the future by eliminating “the cost of tuition and fees at every public two-year and four-year college in America.” Here I want to focus on the ideas behind Warren’s first proposal. Should student debts be forgiven?

Regardless of where one falls on the political spectrum, it is undeniable that mounting student debt is an enormous problem in America. Recent studies have shown that approximately 40 million Americans have student loan debt, and that student debt has become the second-highest category of debt, second only to mortgage debt. Although younger people have the bulk of student debt, individuals from all age ranges have felt the effects, such that “the number of Americans over the age of 60 with student loan debt has more than doubled in the last decade.” There are, of course, consequences to so many people having so much debt: if you are spending a significant amount of your income on repaying student loans then you are going to find it difficult, for example, to buy a house, or car, or save, or invest for your future. It’s also unclear what will happen if a significant portion of those with debt default on their loans, with some economists comparing the student debt situation to the mortgage crisis a decade ago. With student debt being an urgent problem, the idea of addressing it by implementing a debt forgiveness plan might then seem like a good first step.

There are many practical questions to be asked about the implementation of a debt-forgiveness plan like the one Warren proposes (she has, of course, thought about the details). There have been concerns with Warren’s plan, however, that aren’t so much about the dollars and cents as they are about blame and accountability. In answering the question of whether debt should be forgiven we need to first think about who is to blame for it.

A natural place to locate blame is with the students themselves. Here is an example of an argument that one might make for this view:

Those signing up for college know full well what they’re getting themselves into: they know how much college costs, how much they will have to borrow, and generally what that entails for repaying those debts in the future. No one is forcing them to do this: they want to go to college, most likely for the reason that they want a higher paying job that requires a college degree. It may very well be the case that it is difficult to be ridden with debt, but it is debt for which they are themselves accountable. Instead of this debt being forgiven they ought to just work until it’s paid off.

Arguments of this sort have been presented in numerous recent op-eds. Consider, for example the following by Robert Verbruggen at the National Review:

“Where to start with [Warren’s proposal]? With the fact that student loans are the result of the borrowers’ own decisions – often good decisions that increased their earning power? With the fact that people who’ve been to college are generally more fortunate than those who have not? With the fact that this discriminates against people who paid off their loans early, as well as older borrowers who have been making payments for longer?”

In another article, Katherine Timpf similarly claims that student debt should not be forgiven, and that student debt became such a problem only because students were “encouraged to take out loans that they could not afford in the first place.” Curiously, she goes on to claim that while Warren’s debt-forgiveness plan is “a terrible, financially infeasible idea,” it is nevertheless the case that it is a culture that encouraged over-borrowing that is ultimately to blame. It is difficult to make coherent sense of this position: if it is indeed a culture that encourages excessive borrowing that is to blame, then it is hard to see why all the blame should fall to the students.

That student debt is primarily the result of broader societal factors, and not that of bad decision-making, laziness, or unwillingness to “stick it out”, is the driving thought behind many of those who are in favor of debt forgiveness. There are undoubtedly many such factors that have contributed to mounting student debt, but there are typically two that are appealed to most frequently: the skyrocketing cost of tuition and the stagnation of wages. While Warren herself notes that she was able to afford college by working a part-time job, doing so in the modern economy is often very close to impossible. Without independent support it seems that students have little choice but to take out increasingly large loans.

Here, then, is where the ideological heart of the debate lies: those who argue in favor of debt-forgiveness will generally see the blame for the student loan crisis as predominantly falling on societal factors (like increased tuition and stagnated wages), whereas those who argue against it generally see the blame as predominantly falling on the students themselves. Presumably we should assign responsibility where the blame lies, and so depending on who we think is most to blame will determine whether we should implement something like debt forgiveness.

However, we have seen that there is substantial data supporting the view that the student debt crisis is largely attributable to societal factors outside of the control of the students. Furthermore, the thoughts that students are simply “not working hard enough” or “just want a handout” tend to be based on little more than anecdotes and bias (stories of students working multiple jobs just to make ends meet are readily available). This is not to say that students should not be assigned any blame whatsoever for their decisions to go into debt for their educations. However, it does seem that significant contributors to those debts are ones that are outside of a student’s control. As a result, it does not seem that students should be fully blamed for their debts.

Even if this is so, should we think that the best way to take responsibility for those debts is to implement debt forgiveness? As we have seen, some have expressed concerns that forgiving debts would be, in some way, “unfair”. There are two kinds of unfairness that we might consider: first, it might seem to be unfair to those who have already paid off their student loans through years of hard work; second, it might seem to be unfair to those who have to pay for someone else’s debt – Warren’s proposal to finance her debt forgiveness plan, for example, is to generate funds from a tax increase on the extremely wealthy, and one might think it unfair that these individuals should have to cover the debts of someone else. Would a debt-forgiveness proposal be unfair in these ways, and if so, is that good enough reason to say that it shouldn’t be implemented?

While these concerns about fairness might seem like appealing reasons to reject debt forgiveness, upon closer inspection they do not stand up to scrutiny. Consider the first worry: if a debt forgiveness plan is implemented it will indeed be the case that there will be some people who have just finished paying off their debt prior to the policies taking effect and so will not be able to take advantage of their debt being forgiven. It would then seem unfair to privilege one group over another, where the only relevant difference is that the former took on their debt later than the latter. But it is hard to see why this should result in not having any debt forgiveness at all: the argument that “well if I don’t get it, they shouldn’t either!” does not solve any problems. This is not to say that such unfairness should not be addressed at all – perhaps there could be some kind of reimbursement of those who paid off debt before it was forgiven – but it does not seem like a good enough reason to not offer any debt forgiveness to anyone. The second worry similarly fails to hold much water: unless someone takes issue with the idea of taxation in general, then there does not seem to be anything particularly unfair about having the extremely wealthy pay more to aid others.

There are, of course, many factors to take into consideration when considering something like a debt-forgiveness plan, and Warren’s plan in particular. Regardless, it seems that given the severity of the student debt problem, and that the factors that contributed to the problem are largely out of the control of the students themselves, that the responsibility for student debt cannot fall solely on the students themselves.

The Ivy-Wall Street Pipeline

The Ivy League has always been associated with high status. It is the elite of the United States higher education system, boasting some of the most successful graduates in the world. Alumni from schools like Harvard and Yale have gone on to become politicians, doctors, artists and a variety of other accomplished careers. Yet, in recent years, one high-status career path has begun to dominate the graduating classes of the Ivies: the Wall Street analyst.

Continue reading “The Ivy-Wall Street Pipeline”