Outstanding student debt has now eclipsed $1.6 trillion, making it the second-largest source of consumer debt behind mortgages. The federal government is the largest creditor, owning $1.3 trillion in outstanding debt from nearly 43 million Americans.
This equates to just over $30,000 per debtor. Carrying this much debt naturally means young workers have less to spend and to save. Given that the cost of higher education has doubled about every 10 years, the burden of student debt is likely to become heavier for future college graduates.
What can be done to alleviate this burden? More important, what should be done?
One option, which also appears to be the preferred policy of President Biden, is student-loan forgiveness, as The Wall Street Journal reports (paywall). Taken at face value, the cancelation of part or even all outstanding student debt is the most direct way to address the crisis. On closer inspection, though, this policy unfairly shifts the burden from the shoulders of college graduates to the American public.
Between 2009 and 2019, the federal debt nearly doubled, rising by approximately $1 trillion per year on average. Federal debt accumulated so quickly during this period that, according to a March 2020 Government Accountability Office report, interest payments are on pace to surpass spending on Medicare, Social Security, and total discretionary spending by 2049. And that was before the trillions spent this year in stimulus packages.
As Christians, we see the Bible’s instructions to individuals to stay out of debt (Prov. 11:15; Prov. 22:26; Rom. 13:8). We also know, from the common grace of economics, that governments can judiciously use debt to secure or advance the welfare of their people. For example, opening a bank during the Revolutionary War gave the American army funds to defeat the British.
But we want to be careful with debt, because we know “the borrower is the slave of the lender” (Prov. 22:7). Even national debt should be approached with caution and a responsible plan for repayment.
Even national debt should be approached with caution and a responsible plan for repayment.
With this in mind, it’s important to note student-loan forgiveness will add an additional $400 billion to $1.3 trillion in federal debt (spread across the next decade). And that’s just at current debt levels—not counting future generations of students who will likely want their loans forgiven as well.
Is it worthwhile?
Fairness in Paying Debts
It’s fair to say an educated population is a good thing. Studies show that more educated individuals are more productive, make their colleagues more productive, commit fewer crimes, and are healthier. Some Christians could reasonably argue that providing free education, as we do for K–12, is a tangible way of loving our neighbors, especially those who can’t afford college.
The problem is that the benefit to society of highly educating one person isn’t a lot—usually less than the thousands a degree costs. But for the student, who will likely make a lot more money in a lifetime, the degree may be worth the cost. Studies of public and land-grant universities show that (on average) college graduates earn more money, better handle economic recessions, have better access to health care, and are more likely to be employed than those who didn’t attend.
The people best able to pay for college debt, then, are those who received the education. Perhaps a better solution than blanket forgiveness––which would predominantly benefit middle- to upper-income households––is targeted aid to college-capable students from lower-income families.
We want to be careful with debt, because we know that ‘the borrower is the slave of the lender.’
Offering a government-funded college education would not be fair to taxpayers who do not have student debt. Remember, only 13 percent of Americans owe loan debts to the federal government. Is it fair to ask for that much funding from past generations of students and their parents who have already paid for their education? And what about workers who never attended college, many of whom will earn less in their lifetime than college graduates? Should these individuals now be required to pay for the education of others in the form of higher taxes and fewer government services?
No. The fairest and most efficient system is still one in which the primary burden for financing college falls on students and their families. This is consistent with general biblical commands to accept personal responsibility to pay for services received and to steward well the resources God has given us (Rom. 13:7; Ps. 37:21; Prov. 22:27; 1 Tim. 5:8).
Expand Repayment Options
At my work, I have a generous retirement plan. But as someone with student debt, I’ve often wished I could use that contribution for educational loans instead. Not only would such an option allow students to decrease debt with pre-tax dollars, but it would accomplish the same goal—increasing household wealth—that saving for retirement does.
And since it offers an immediate reward in easing monthly payments, it may be attractive to recent graduates in the early stages of their careers who are starting families. This option, combined with the recent movement toward income-based payment plans, would reduce the burden of student debt on individuals without shifting the burden to the rest of the public.
As someone who has been a poor steward in this respect, I want to offer a word of caution.
Even better would be thinking clearly about student loans before seeking them. As someone who has been a poor steward in this respect, I want to offer a word of caution. While the financial return on investing in college is typically high, it is not uniform across disciplines and often is not realized until mid-career. Therefore, it’s a good idea to investigate starting salaries for different majors, as well as the true cost of student debt. I encourage students and their parents to seek ways to minimize the cost of education, such as working for a year or two to save for college, taking prerequisites at a community college, and living at home.
As in all things, as you plan your education, set your heart to honor God and advance his kingdom. Our vocation is a significant part of God’s calling on our lives. For many of us, attending college is the first step in that pursuit.
Seen in this light, it’s a great honor to pay for the education that equips us for the work the Lord prepared for us before we were born. We must also be diligent, through avoiding unnecessary debt, to not let that honor become a burden and hindrance to our work.