Should The US Forgive Student Debt? A New Debate

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Intelligence Squared U.S. released their latest debate today tackling the motion “Forgive Student Debt.” Across an hour of lively back and forth, the two sides debated topics ranging from whether forgiving student debt counts as a bailout for the well-off to student debt‘s disproportionate impact on minority students.

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Arguing for the motion are Consumer Financial Protection Bureau veteran Dalié Jiménez and the Center for Responsible Lending's Ashley Harrington. Arguing against it are American Enterprise Institute's Beth Akers and Reason editor-at-large Nick Gillespie

The winner will be determined over the course of the next week. Anyone who watches the debate can cast two votes on the issue - one before they watch and one after. Whichever team gains more in percentage point terms wins. The winning team will be announced on April 1.

Watch the debate video here:

Listen to it as a podcast here:

Cast your votes here:

Debate: Forgive Student Debt?


The following is a partial transcript of the "Forgive Student Debt" debate.

John Donvan: I want to move forward a little bit, Dalie, with a point that was raised earlier by your opponents, I believe by Beth, that if the program you're arguing for were to come to pass and a significant amount of student debt were wiped out at the stroke of the President's pin on, let's say, April 1st, that may be a very hard political sell to all of the college students who went borrowed, paid back their debt, cleared it off, worked hard to do it.  They're going to say, "Well, why did I do that?  Where was my turn for that?"  And I just wanted to ask you to address that issue, because I think it's probably one that would occur to a lot of people who are watching the debate.

Dalie Jimenez: Yeah.  I'm one of those people   I took on $140,000 in debt.  And, you know, I was able to pay it off.  Great.  Great for me. I struggled.  I don't want anyone to struggle, and many are struggling way worse.  I don't feel sorry for me.

Beth is talking about making these really nuance policy decisions.  Great.  When does Congress ever get to do that?  When does that actually ever happened?  President Biden can actually do this right now, forgive $50,000 per person across the board easy, fast, no means testing, boom.  Then we have a smaller program, that $1.7 trillion to deal with, where we can then, you know, improve IDR.  By the way, IDR is not one program.  It's four or five programs, and they're different, and you're not eligible for all of them, and it is a mess.  And even people who study this don't know it off the top of their head, because it is just so complicated.  We should not be making people go through all these hoops and learn all of this nuance -- just all of this silly stuff, really, in order to get forgiveness in two decades.

John Donvan: All right.  Beth, I want to take a question to you.

You opponents -- again, in Ashley's opening comment, she's sort of alluding to the idea of an individual's education not just being about the individual but it's actually a public good. That individual, by being educated, number one, can be a taxpayer, contribute the economy, just contribute socially.  And also, that being relieved of the tax burden frees that money up to become a stimulus in itself in the economy -- no, Ashley didn't say would pay for it itself fully, but she said that it's a positive benefit to the economy, particularly in this year of COVID to have people have more money in their pocket to be able to spend more.  I just want to ask you to address that part of her argument.

Beth Akers: Sure.  So, this is this is a common belief that student debt would actually be a really effective stimulus which is particularly important right now.  We're in a depressed economy.  The problem, again, is actually what I mentioned before about the regressivity of the policy.  When economists craft stimulus programs, they cut checks and send them to people who have the lowest income in the economy.  Because the way that stimulus works is that you need people to go out and spend that money for it to actually have a stimulating effect on the economy.  When you give money to more wealthy people, that has a lower multiplier.  They go less into the community and spend and it creates fewer jobs and fewer sales and things like that.  And so student loan cancellation has that same problem. Since a lot of it goes to very well-off people, it's really inefficient because they aren't the ones who are going to go out and stimulate the economy.

The other problem is that, let's say we were to forget the whole thing.  That 1.7 trillion.  Student loans are totally different from that number, from what people see on a month-to-month basis.  So, maybe alleviating a $200 a month payment for somebody with a decent amount of debt, it's costing us.  Again, that 1.7 trillion, we're only getting a small fraction of that stimulus today because of the way that people are having their cash flows only have to manage a monthly payment on their student loan.

So, is it a stimulus?  Yeah.  Does it address racial wealth and inequality?  Yes.  Does it do these things very, very, very inefficiently?  Yes.  And so, the problem is if those are the problems we're trying to solve, there are more direct solutions to those problems than student loan cancellation.

John Donvan: Ashley, I'd like to let you respond to that.

Ashley Harrington: Well, I think we've got to be very careful to -- say, from our perch and our position in our lives, a $200 monthly payment is not hard.  That actually is hard for a lot of people who are struggling.  So, I think we got to be very clear about that, that people have different levels of what is considered a struggle.  And there's a lot of people who are absolutely struggling to make their payments.

There have been numerous studies done that show the economic benefits of cancellation and how that will be put back into the economy over the years.  And I think we've also laid out how it's not just rich, wealthy people. The majority of people who will get these benefits are low-income, low-wealth people.  Student debt, the balances themselves having to pay debt add to the cost of credit over the course of someone's life, it prevents them from saving.  It affects their ability to get a home.  They can't save for a down payment.  It also means that that money is determining their debt-to-income ratio when they want to qualify for a mortgage.  And we just saw the news that housing prices are skyrocketing. So, people who have a bunch of student debt, and the houses cost more, and they can't get a loan to get it because they can't qualify, they couldn't even save for a down payment.