For many Americans it’s hard to sustain, or even achieve, the promise of the American dream in a post-Recession economy. That’s because we have become Atlas, carrying a world of student debt on our shoulders with no relief in sight.
Collectively, Americans owe $1.5 trillion in outstanding student loan debt. It limits our potential, preventing us from starting that first new business or buying that first new home, or even starting a family.
According to The Macroeconomic Effects of Student Debt Cancellation study done by the Levy Institute of Economics at Bard College, mounting student debt impedes economic growth “to both household financial stability and aggregate consumption and investment.”
“The policy of debt cancellation could boost real GDP by an average of $86 billion to $108 billion per year,” the study states. “Over the 10-year forecast, the policy generates between $861 billion and $1,083 billion in real GDP (2016 dollars)”.”
In other words, the elimination of student loan debt would allow Americans to break the chains of financial ruin and give birth to a global intellectual and economic renaissance, the likes of which we haven’t seen since 1945.
[Related: Elizabeth Warren calls for free college, sweeping student loan forgiveness program]
So, how to bring this about? The first step is for states to properly fund their public colleges and universities, investing more in higher education. The second step is to get the federal government out of the lending game. This will allow our well-regulated free market to drive down the cost of tuition to what most students can afford. Step three is to create a pathway for partial student loan debt relief, and to make that debt dischargeable in ordinary chapter 11 procedures.
A college education is currently a prerequisite for joining the middle class. Even then, it’s no guarantee for future happiness or success.
Private universities (which cater mostly to wealthier, upper-middle class type students) are often given massive subsidies in the form of low-cost student loans and tax deductions for people who make charitable contributions to them. Public universities also get subsidies from the federal government. Whatever state governments fail to put into their own institutions — and they’re put in $7 billion less this year than they did in 2008, adjusting for inflation — they count on Uncle Sam to make up the different through loans to cover higher tuitions.
This is a position Republicans should embrace. In a world without taxpayer-subsidized no-risk loans, colleges will be forced to make tuition affordable to more students. They will also be forced to create new, private financing options that students can access without putting the weight of the world on their shoulders for decades to come.
As it stands, private institutions are not sufficiently incentivized to lower tuition rates to compete with publicly funded schools. Public schools are raising tuition to make up for a lack of state investment. The end result in both cases is the same.
It’s time we balance the scales for all. It’s time for Republicans to take the lead and provide real solutions to a problem that’s rapidly running out the clock like a ticking time bomb. Failing to do so not only violates our principles but would also be an inherent dereliction of duty to our national preamble: that every American is entitled to life, liberty, and the pursuit of happiness.
Joel Acevedo is president of the Brooklyn Young Republican Club.
