By Kate Padgett Walsh
President Joe Biden’s plan to forgive US$10,000 to $20,000 of student debt for up to 40 million eligible borrowers was recently put on hold when a federal appeals court temporarily paused the program.
Six states had asked the court to block implementation of loan forgiveness until their lawsuits against the program were resolved. The states allege that they would be financially harmed if borrowers receive loan forgiveness.
As an ethicist who studies the morality of debt, my work explores the question at the heart of opposition to student loan forgiveness: Is student debt cancellation unfair?
The moral case against canceling
Educational debt is often regarded as an investment in one’s future. Millennials with a Bachelor of Arts degree, for instance, typically earn $25,000 more per year than those with just a high school diploma. College education is also generally correlated with a variety of positive life outcomes, including physical and mental health, family stability and career satisfaction.
Given the benefits of college education, canceling student debt appears to some as a giveaway for those who are already on their way to becoming well-off.
Canceling debt also seems to violate the moral principle of following through on one’s promises. Borrowers have a moral duty to fulfill their loan agreements, the philosopher Immanuel Kant argued, because reneging on promises is disrespectful to oneself and others. Once people have promised to do something, he noted, others rely upon that promise and expect them to follow through.
In the case of federal student loans, a borrower signs a promissory note agreeing to pay back the government and, ultimately, the taxpayers. And so student borrowers seem to have a moral duty to pay their debts unless mitigating circumstances like injury or illness arise.
The moral case for canceling
Fairness and respect, however, also demand that society address the magnitude of student debt today, and especially the burden it imposes on low-income, first-generation and Black borrowers.
Young people today start their adult lives burdened with much more student debt than previous generations. Almost 70% of college students now borrow to attend college, and the average size of their debt has risen since the mid-1990s from less than $13,000 to about $30,000 today.
As a result, total outstanding student debt has jumped to over $1.5 trillion, making it the second-largest form of debt in the U.S., after mortgages.
This explosion in student debt raises two significant moral concerns, as my student Justin Lewiston and I argue in an article published in 2020 by The Journal of Value Inquiry.
The first concern is that the distribution of costs and benefits is highly unequal. Fairness requires equal opportunity, as the philosopher John Rawls argued. Yet, while borrowing for education is supposed to create opportunities for students from disadvantaged backgrounds, those opportunities often fail to materialize due to educational challenges and wage gaps in the labor market.
Data shows that low-income students, first-generation students and Black students face much greater struggles in repaying their loans. About 70% of those in default are first-generation students, and 40% come from low-income backgrounds. Twenty years after college, when white borrowers have repaid 94% of their loans, the typical Black student has been able to repay only 5%.
These repayment and default rates reflect significantly lower graduation rates for students in those groups, who typically need to work long hours while also in school and hence engage less with both the academic and nonacademic aspects of college.
But they also reflect significantly lower post-graduation incomes for such students, due in no small part to continuing social and racial wage gaps in the labor market. Black men with a bachelor’s degree make, on average, more than 20% less than white men with the same education and experience, though that wage gap is smaller for women. And first-generation graduates typically make 10% less than students whose parents graduated from college.
A second moral concern is that student debt is increasingly causing widespread distress and constraining the lives of borrowers in significant ways. Consider that even before the pandemic, 20% of student borrowers were behind on their payments, and first-generation borrowers and borrowers of color are struggling even more.
The financial distress indicated by this high rate of delinquency is undermining both the physical and mental health of young adults. It prevents young adults from starting families, purchasing cars, renting or buying their own homes and even starting new businesses.
Unsurprisingly, these negative effects are disproportionately experienced by first-generation, low-income and Black student borrowers, whose life choices are especially restricted by the need to make loan payments.
Avoiding moral hazard
Some analysts have argued, however, that canceling student debt will create a problem of moral hazard. A moral hazard arises when people no longer feel the need to make careful choices because they expect others to cover the risk for them.
For example, a bank that expects to be bailed out by the government in the event of a financial crisis thereby has an incentive to engage in riskier behavior.
Moral hazard can be avoided by combining student debt cancellation with programs that reduce the need for future borrowing, especially for first-generation students, low-income students and students of color.
One success story is the Tennessee Promise, a program enacted in 2015 to make tuition and fees at community and technical colleges free to state residents. This program has increased enrollment and retention and completion rates, while reducing borrowing by over 25%.
New Mexico has recently gone a step further, offering free tuition scholarships at all public colleges and universities, including some trade programs. The scholarships are offered to all state residents who maintain a 2.5 GPA while in college and enroll in at least 6 credit hours per semester.
Ultimately, morality requires a forward-looking as well as a backward-looking approach to debt cancellation. The way forward, I would argue, is to create a fairer society by canceling some student debt and reversing the trend of funding higher education with student borrowing.
Kate Padgett Walsh is Associate Professor of Philosophy at Iowa State University.
The Conversation arose out of deep-seated concerns for the fading quality of our public discourse and recognition of the vital role that academic experts could play in the public arena. Information has always been essential to democracy. It’s a societal good, like clean water. But many now find it difficult to put their trust in the media and experts who have spent years researching a topic. Instead, they listen to those who have the loudest voices. Those uninformed views are amplified by social media networks that reward those who spark outrage instead of insight or thoughtful discussion. The Conversation seeks to be part of the solution to this problem, to raise up the voices of true experts and to make their knowledge available to everyone. The Conversation publishes nightly at 9 p.m. on FlaglerLive.
Dennis C Rathsam says
Race has nothing to do with student loans. You borowed the money for an education, you wanted to go to college. You partied, drank way to many beers , and now you want the rest of us to foot the bill! BULLSHIT!!!!!! My kids got student loans, and me too, but at least we are paying it back. My kids all have good jobs, make good money! Its the American dream. All the college kids of past generations payed thier way. And payed back thier student loans. What makes his woke generation thinks that they are different!
Bullshit your own self! Millions, like me, owe their educations to the GI Bill and earned scholarships and repaid loans through public service jobs. I don’t see anybody rushing to repay PPP loans from the pandemic, do you?
Timothy Patrick Welch says
Wake up, smart people already go to school for free or at a reduced rate.
University endowment funds should be depleted first to assist poor smart people to attend.
Loan forgiveness implies the education received was not worth the cost to attend. Or maybe the student was mis-lead or harmed by the experience. Or maybe its a kick back for political support.
Stop the Insanity says
It used to be that if one did not want a lot of student debt, one would work themselves through college. If the cost of higher education is too high, than the government should address that issue with the colleges, or students can choose a less expensive local option. There is a huge demand for labor trade employment, which require no large student loan dept. That, however, requires hard work, and this seems to be missing these days. I see an aversion to work, and that is a recipe for socialism and the destruction of the Country we love. The dept of others is not the responsibility of the taxpayers. Full stop.
Robert Joseph Fortier says
I am white, My father never went to college or even finished high school. We were Poor.
If one is to be honest, color doesn’t matter when your parents are broke and your father works his ass off must to meet the bills.
So tired of the injection of race in every possible way.
I joined the Army during Viet Nam…that was the only way I knew of to better myself and be able to provide for myself when I grew up…I got free tuition in some colleges because I was a Veteran.
Our nation is becoming weak, too many never attend college or training in a trade that will allow them to make a decent living.
Yet, we blame those who have “made it” for others not even trying.
Keep beating this drum, but it isn’t gonna replace family, education, fortitude.
This is simply socialism, which never has and never will work…But maybe…just maybe, many will do the right thing and utilize the tools they were born with. Sorry if that seems to hard to understand.
R. S. says
“New Mexico has recently gone a step further, offering free tuition scholarships at all public colleges and universities, including some trade programs. The scholarships are offered to all state residents who maintain a 2.5 GPA while in college and enroll in at least 6 credit hours per semester.” And that’s the way to go indeed. Most European countries now offer tuition-free education, including university-level education. And that is not only for students of that nation; it is also extended to international students. A wise and forward looking person should realize that the people who have profited from the nation’s wealth of resources should pay for the perpetuation of that system by providing learning to youngsters growing into that system. The onus of maintaining a sound educational system is not on young people; the onus is and should be on the people who have already profited richly off that system. It is absolutely ludicrous to expect a poor family with a $38,000.00 yearly income to invest, say, $13,000.00 in a college degree to push bedpans under ailing seniors–if they get a job at all. The financial onus should be on the part of the established folk.
Deborah Coffey says
Florida just received $1.2 billion in federal monies following Hurricane Ian (yes, a bit of those monies were disaster loans).
Then, there was the Big Bank bailout of 2008. According to Forbes, “Most people think that the big bank bailout was the $700 billion that the treasury department used to save the banks during the financial crash in September of 2008. But this is a long way from the truth because the bailout is still ongoing. The Special Inspector General for TARP summary of the bailout says that the total commitment of government is $16.8 trillion dollars with the $4.6 trillion already paid out. Yes, it was trillions not billions and the banks are now larger and still too big to fail.”
How about the Auto bailout? Reuters reports, “The U.S. government spent about $50 billion to bail out GM.”
Then, there were the Trump/Republicans’ tax cuts: https://www.hibudget.org/blog/real-cost-trump-tax-cuts.
Bailouts shouldn’t always be about money. I like the higher purpose of helping young people becoming educated.
Joe D says
Lots of factors affecting the student debt crisis. When I graduated from Pen n State in 1977, tuition was approximately $2600. When my daughter went to Penn State in 2004 the tuition was $26,000 (10 x higher in 27 years …1000% increase)! By the time she graduated, the tuition was $34,000! She got an excellent college preparation and graduated with her teaching certification already under her belt, and over $80,000 in student loans ( not counting the $10,000 per year in PARENT PLUS loans I took out and paid over the following 10 years). Her starting salary as a public school teacher was $38,000! In a few years, it was clear she was not going to be able to keep up those loans (plus rent, plus living expenses), so she left teaching (a great loss for the teaching profession, since she was MAGICAL with kids). She flipped to the financial side, then eventually in the last 5 years to the IT side, and was able to get her loans down to $15,000. This final loan forgiveness will make a big dent in those loans.
A second factor was the student loan structuring When she started college, the loans were 3.4%. By her second or third year ( under the Bush administration) the interest rates jumped to 7%! And those interest rates although deferred payment until she graduated, they were continuing to compound through her entire college years. During the post college years, she moved back home twice, to save money so she could keep up with the loans
I agree that students of COLLEGE ABILITY, needs to be given financial assistance to attend college ( or approved technical programs). I DO MOT agree with blanket government community college tuition. I agree with Arizona, that requires 6 credits (1/2 time attendance) and maintaining a 2.5 point grade average (C+).
Not everyone is cut out for college. If you have worked hard in school, and have the grades and ability to handle college work , the cost of a basic PUBLIC college should not be the barrier keeping you from attending. However, in the past, private “ for profit” colleges popped up which as the saying went at the time : “They’ll admit any student with a PELL (government low income grant) AND a PULSE. “. Leading to students whose money (and the taxpayer’s money) we’re gladly taken, who were BARELY able to manage C’s and D’’s in high school, and could not manage college level work enough to graduate ( even in 5 years), before MOST of those school closed their doors, sticking students with the continuing loan debt ( this was recently addressed by the Biden administration is forgiving those type of loans)
This is a complex situation. Florida tried to solve it by freezing Florida State school tuition for many years, which in many cases lead to poor quality graduates (many states at the time refused to hire Florida Teaching graduates, unless they passed the National Teacher Certification exams BEFORE they were hired, and not the usual 2 year grace period most other States graduates were allowed).
I don’t know the solution to this problem, but we are fast pushing the Middle Class out of existence, with only the VERY WEALTHY prospering, and the rest dropping into the low income majority. This country was founded on the belief that regardless of who you are, or where you come from, hard work will allow you to eventually achieve the AMERICAN DREAM, in a LEVEL PLAYING FIELD, given the opportunity!
I paid off my student Loans and much of my Son’s but I think that it is proper to forgive the $10,000 as proposed by President Biden. These loans have a strangle hold on the Students due to the high cost of an education. I know that the Students made a promise to pay these loans back but Senator Rubio made a promise to represent the People of Florida and did not even show up fpor the vote on the Bill to fund Disaster Recovery. Large Banks were bailed out; the Airline Industry was bailed out; the Automotive Industry was bailed out. what makes these Entities any better than our current Students?
The major problem that exists with the Forgiveness of the Student Loans is that the Republicans VOTED AGAINST IT!!
Timothy Patrick Welch says
I agree it was very wrong to bailout the corporation!
I really don’t understand the motivation behind those bailouts. And I don’t recall vocal outrage. It was sad to see it unfold.
The Geode says
Seeing as how being in debt is “racist” and us “poor dumb blacks” don’t know any better, I need somebody to pay my mortgage. I was under the impression that I had a right to free or low-income housing and didn’t know what was contained in those papers I signed without reading and spent my money on cars, partying, women and weed. How dare those people threaten me with payments? Where is my stimulus???
Whatever happened to the concept of working off student loan debt through filling positions in under-served community programs for the length of time it might take to cancel some of that debt?
Getting something for nothing doesn’t usually working out so well, as people tend not to value that which they don’t perosnally work for.
I would hate to see college become little more than an post-extension of high school.
Joe D says
There was (and again is ) a program for “Public Service “ loan forgiveness for EMT’s, teachers, some public sector nurses, firefighters and police, etc. You had to work 10 continuous years, make 10 continuous years of payments, only CERTAIN loans counted…any other hoops to jump through.
However during the Trump years (B. DeVose, the biggest joke of a secretary of education there has been in recent years), 98% of the applications for this loan forgiveness were DENIED, due to a technicality
Now, under the BIDEN , if 10 years ( now don’t have to
Be continuous) years have been worked in public service jobs and 10 years of paid student loans ( the types of loans have now been expanded) student loans can be forgiven….so they are requesting people given prior denials reapply ( but the cut off was 10/31/22, unfortunately)
It seems like the alternative education funding sources for middle income families ( those making more than PELL grant limits, but making less than $ 90k ) who can’t write even PUBLIC college $30k+ tuition checks, have fewer and fewer options than large student loans….with fewer well paying jobs ($20-$25/ hour) available once they graduate
The dude says
Ahhhh MAGATs… they never disappoint.
They cheer for massive tax cuts for corporations and millionaires, they cheer for all the businesses whose millions and millions in PPP loans have been forgiven, yet screech “GET OFF MY LAWN!!!” when someone proposes that now, after servicing the corporations and the upper class, we spread a little tiny bit of that same love around to the unwashed masses who weren’t born into wealth.
I’ve paid off two sets of student loans. I just graduated my youngest son with a CS degree last May after working my ass off and making damn sure he wouldn’t have to go into debt like I did for that degree.
I applaud the very minor, and possibly inconsequential assistance (for far too many out there), being given to those whose quest to better themselves was exploited by an industry that grew up, like a mushroom on a cow patty, around the government’s promise to help anyone willing to work for it, a little help getting it.
The easy government money flowed, the sports programs grew, tuition increased even more rapidly to capitalize on that easy money, and the quality of the educations declined. What’s not to love, it’s a MAGAt’s dream.
In many many case of the student loan forgiveness our MAGAt friends are crying about, the original amount of the loans has already been paid back and more. But the debtors are trapped by a cycle of deferments and minimum payments that will probably go on to the end of their days.
Concerned Citizen says
The way this originally started was loans being forgiven if a student was defrauded by a bad school.
Now everyone wants a hand out. And no one wants to take the responsibility of their debt. And I’m not in the mood to help pay it.
Both my Wife and I have Bachelors degrees. She went on to get a Masters and a PHD. We both originally funded our education with the GI Bill. after doing our respective time in the Service. And financial aid which was paid back in the first few years of our careers. Was life easy? No. We both struggled and did without while we paid down our debt. Now we don’t have enormous bills because of it. And we are both ready to retire in the next few years.
If you took a student loan out you knew what you were getting into. And that’s your debt. Not anyone else’s. Why should we be responsible for your debt?
I guess the big banks didn’t know what they were getting into. My and millions of other people tax$,s bailed them out. The little man can’t get nothing from the government we pay taxes to so it can function. O the big banks were and is still ran by white men. Always bail out whitey and ignore the poor people of color.