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It’s Time to Rethink U.S. Student Loan Policy

In August, President Biden announced a massive student-loan forgiveness program. Estimates of the cost to taxpayers range from $300–$500 billion.¹ Under the plan, Americans earning less than $125,000 annually can apply to have from $10,000 to $20,000 of debt “forgiven.”

Many leftists have predictably praised Biden for keeping his campaign promise. In a joint statement, Senators Charles Schumer and Elizabeth Warren gushed, “With the flick of a pen, President Biden has taken a giant step forward in addressing the student debt crisis.” Others, however, have noted the convenient timing of the move, calling it a political ploy to gain blue votes before the midterm elections.

On the day the program was announced, Harvard Law professor Laurence Tribe praised the plan on Twitter: “Good news for thousands of my former students. I’m grateful on their behalf, Mr. President.” The responses were pointed and quick. Former FEC Commissioner Brad Smith tweeted, “Yes, because if there’s any group that needs federal financial assistance, it’s Harvard Law Grads. (Speaking as one of Prof. Tribe’s former students who actually paid back all student loans).” J.  D. Vance, author of Hillbilly Elegy and candidate for the Ohio Senate, added, “Thanks to Tim Ryan and Joe Biden, Ohio workers are paying off the loans of Harvard Law students. If this seems unfair and illegal, it’s because it is.” And Ted Cruz quipped, “Tax waiters & waitresses to pay off the loans of Harvard Law School graduates. Great idea.”

These few are pointing out the obvious—president or not, Biden can’t simply make a grand total of $1.6 trillion in debt vanish. It’s going to be redistributed to American taxpayers. As financial guru Dave Ramsey pointed out, instead of fixing the problem—sky-high college tuition rates, predatory student loan programs, and degrees that clearly aren’t earning the buck—the U.S. has instead rewarded the system.² The president has unfairly shifted the burden onto the millions of taxpaying Americans who chose to forego college, who paid off their own debt, or who found a simpler, cheaper option for their higher education.

Nonmarket Value Added

There are some family ramifications to all this, and some lessons to be learned from abroad. Student loan debt is hardly a friend to the family. Studies have shown that those with such debt tend to marry and have children later, or to forego one or both altogether.³ A 2021 report from the U.S. Congress’s Joint Economic Committee summarized, “Our current model of human capital formation [higher education] has the potential to subtly nudge young adults to put off pursuing meaningful relationships, marrying, and becoming a parent.”

President Biden has put a huge burden on the American family. This is tragic, because the family is actually the first and foremost builder of “human capital”—the value that individual human beings bring to the workforce, to their relationships, and to society at large. A 2005 book on “nonmarket” activities by the National Research Council had this to say: “No other outputs are as quintessentially nonmarket as the production and care of children. While parents may purchase assistance with the care of their children, market care cannot fully substitute for their personal attention” (emphasis added).⁴ The authors add that forces like higher levels of female employment and divorce might be seen as threats to such attention.

Indeed. We see the importance of family in promoting a stable, functioning society in several ways. To begin with, the family is the first and foremost educator of children. Study after study has shown that no single factor matters as much to children’s academic success as does the involvement and support of family. What matters more than anything is not whether a child attends public, private, or home school, but whether the parents are actively engaged in the child’s education. The family is also where children are educated in such things as financial literacy, social skills, household tasks like cooking and cleaning, and much, much more. If we are seeing a demise in “adulting” skills such as these (and we are), look no further than to the breakdown of the American family.

The family also has a stabilizing effect on society at large. Children who grow up in intact families are less likely to perpetrate crimes, misuse drugs or alcohol, or be imprisoned, while children from single-parent homes (almost always fatherless homes) fare worse on all metrics. To be more specific, boys who grow up without fathers are more likely to use drugs, be violent, drop out of school, and wind up in prison. Girls without fathers engage in sexual activity at younger ages and are more likely to have a child out of wedlock. Single-parent families also tend to live in greater poverty, to use welfare more frequently, and to have less upward mobility for their children.⁵

Children of married, two-parent families, on the other hand, achieve higher rates of educational attainment, social mobility, employment, and even physical and mental health than do their fatherless peers. An intact, loving family is the number-one predictor of a child’s later success, and thus that of the nation as well. And unlike the president’s student-loan forgiveness policy, the family is not a taxpayer-funded program.

Family-Positive Policy

But it is possible and beneficial to use various tax and public policies to support families. For a country doing just that, look no further than Hungary. In February 2019, the Hungarian government passed the Family Protection Action Plan. Under this plan, a whopping 4.8 percent of the country’s GDP is devoted to programs aimed at encouraging marriage and childbirth. The incentives include preferential loans to couples who marry when the woman is under 40, mortgage assistance, help in the purchase of a larger family vehicle, mortgage repayment for families with two or more children, parental leave programs for grandparents, and even income tax exemption (for life!) for women who have had four or more children.⁶

The country has put real thought, research, and creativity into bolstering its families. And the programs are working. Marriage rates are up. According to one report, “In the second half of 2019, banks have granted more money in baby-expecting loans than they did in housing loans.”⁷

Instead of canceling the debt of the Ivy League gender studies grad who works as a barista at your local Starbucks, the U.S. should be adopting policies that best protect and assist families.

Notes
1. Maureen Mackey, “Dave Ramsey reacts to Biden’s student loan handout: ‘Obvious political ploy,’” Fox Business (Aug. 24, 2022): foxbusiness.com/lifestyle/dave-ramsey-reacts-bidens-student-loan-handout-political-ploy.
2. Ibid.
3. “Examining the Relationship Between Higher Education and Family Formation,” U.S. Congress Joint Economic Committee (Nov. 3, 2021): jec.senate.gov/public/index.cfm/republicans/2021/11/examining-the-relationship-between-higher-education-and-family-formation.
4. Beyond the Market: Designing Nonmarket Accounts for the United States (The National Academies Press, 2005), 80.
5. Willis Krumholz, “Family Breakdown and America’s Welfare System,” Institute for Family Studies (Oct. 7, 2019): https://ifstudies.org/blog/family-breakdown-and-americas-welfare-system.
6. Zoltán Kovács, “The success of Hungary’s family policy: 2020 has been our best year to date,” About Hungary (Aug. 13, 2020): https://abouthungary.hu/blog/the-success-of-hungarys-family-policy-2020-has-been-our-best-year-to-date.
7. Ibid.