“Just do it.” That was not the mantra of Nike being repeated in a recent Inside Higher Education article; it was the advice of a professor writing about student debt forgiveness. He argued, “There’s no reason not to do it, so we should do it.” One would hope that a college professor would be both more truthful and more thoughtful in his analysis. Of course, there are plenty of reasons not to do it, and a more responsible position is to recognize that there are arguments on both sides of the issue and then try to evaluate them. In this blog, we want to explore the current proposed policy of student loan forgiveness from a Christian perspective and examine how it might align with ideas of both Biblical justice and stewardship.
Since we pray in the Lord’s Prayer, “forgive us our debts, as we also have forgiven our debtors (NIV),” Christian academics and students will likely be drawn to an argument for loan forgiveness. Indeed, Christians rightly uphold the Year of Jubilee (Lev. 25) as a model for economic justice and hold sacred the story of a master who forgives a servant with enormous debt. However, do these passages lead us directly to a policy of student loan forgiveness?
A quick analogy may help us see some of the many problems inherent in forgiving student loans. Let’s imagine a proposal that suggested the forgiveness of car loans. Most of us would immediately see many drawbacks of such a proposal. Individuals who bought more expensive cars would get greater benefits from car debt forgiveness, while those who purchased cheaper cars would benefit less. Those who reduced consumption and saved their money to purchase a car or traveled via public transport wouldn’t see any benefit at all, and would rightly feel mistreated by this policy. Many might suspect that this debt forgiveness would happen again and be sure to borrow more heavily for future car purchases. Car consumers and car manufacturers would be strong proponents of such a policy, but some of us might wonder whether the money spent on car loan forgiveness could have been more profitably spent on more pressing needs now or even saved for the future. Almost of all of us would be hesitant to have our money go to pay off someone else’s car loan, no matter how good of a person we were.
On the face of it, car loan forgiveness doesn’t seem to meet the requirements of Biblical justice and stewardship, and no one we know is proposing it. Although this is not a perfect analogy, student loan forgiveness has many of the same problems and issues as car loan forgiveness Yet, this idea is one of the most prominent public policy proposals being discussed in the public square. How should we as Christians evaluate this idea?
First, let’s start from the perspective of a student with the debt. It is quite clear that Christians are to pay their debts, particularly government debts and taxes (Romans 13:6-7). The following verse (13:8) exhorts us to “Let no debt remain outstanding, except the continuing debt to love one another, for whoever loves others has fulfilled the law.” Christian college students should make every effort to pay off their student loan debts. The good news on this front is that students attending Council for Christian Colleges and Universities do a better job of repaying their debts.
Yet, there is nothing wrong with arguing for debt forgiveness, and we should encourage our governments to create structures for debt relief for those with oppressive financial burdens. We find in Israel’s law means for controlling the harmful effects of the fall in that God created a system that would limit debt (Lev. 25:10-12). In this regard, Christians should support legal principles that would allow for the relief of oppressive debt (e.g., certain kinds of bankruptcy laws) and for policies designed to prevent people from being tricked or manipulated into taking on more debt than they can afford. However, as is usually the case with public policy, we need to ask if the policy mechanism will actually accomplish the moral end or purpose that is behind the Biblical teaching. We cannot simply moralize from the Bible as if it is obvious that all Christians should support student loan forgiveness.
When we do further study, we find significant reasons to doubt that the proposed student loan forgiveness policy would benefit the poorest individuals in our society. In fact, it could actually exacerbate economic injustice. College student loan forgiveness is what economists call a regressive policy, one that benefits high income earners the most. One study found that full debt cancellation would distribute $192 billion to the top 20% of earners, and only $29 billion to the bottom 20%, with African Americans and Hispanics benefitting the least. Other partial plans of anywhere from $10,000 to $50,000 loan forgiveness are also regressive in nature. Such a program obviously helps college graduates the most (grad school graduates even more), and those are the higher earning people in our society. Second, as one Washington Post article by two economists points out, we already have jubilee-like structures in place for low-income borrowers that “not only peg payments to wage levels but forgive loans after some period, typically 20 or 25 years.” That’s even shorter than the 50-year Jubilee prescribed for Old Testament Israel.
Student loan forgiveness programs can also encourage irresponsibility among both higher education institutions and students. The writers of this blog are well aware that incentives for institutions and students can align in this area, and that by questioning the policy of student loan forgiveness we might become unpopular with both our students and our administrators! One reason that college tuition has risen higher than the rate of inflation is that colleges have been able to rely upon government loans as a subsidy that allows them to raise tuition. A policy of debt forgiveness would give colleges an even greater incentive to try to enroll more students and encourage them to take on even more debt. In this case, institutions benefit and evade their moral responsibility. Students who believe debt will be forgiven have greater incentive to borrow beyond their means and enroll in college, even if college attendance may not be their wisest decision in some cases.
The ones that are hurt in this scenario are the more responsible students who actually pay their debts (or bypass the opportunity to take on debt) and the taxpayers who finance debt relief. In this respect, universal student loan forgiveness has the possibility of causing strife between people in different groups and from different classes (see for example the beginning of this editorial). People who have recently paid off their debts are going to resent current debt forgiveness. These people made significant sacrifices, while some who are having problems with debt repayment acted irresponsibly. Policies that reward irresponsible versus responsible behavior are not those that promote flourishing in the long run.
With regard to students, to make the case for student loan forgiveness, it would seem necessary to make the case that people took on these decisions while being tricked or discriminated against. As the article cited indicates, in some cases, this could be the case, but loan forgiveness should then target those who have experienced this injustice. If one is still committed to debt forgiveness, we find attractive a proposal by two economists that suggests nudging more people into current income repayment plans, such as “a plan that required a 10 percent payment for all income above 150 percent of the poverty line, and forgave loans after 20 years.” The authors found that the result of this policy is that “people in the bottom decile of earners would get four times the amount of debt forgiveness as those in the top decile.” In that case, the policy would no longer be regressive but would benefit those who are poorest.
With respect to education, we can easily imagine of a couple of policies that would work better at advancing the cause of the poor than universal debt forgiveness. First, why not consider an increase in Pell grants for education? For example, a Los Angeles Times editorial arguing for student grant forgiveness noted, “federal grants, known as Pell Grants, have not increased to keep pace with the skyrocketing price of a college education,” yet they failed to suggest that increasing Pell grants is the answer to furthering economic justice. A quick comparison of who benefits from increases in Pell grants for education versus student debt forgiveness helps us to understand why student debt forgiveness may not be the optimal policy. Second, why not increase financial aid for education into trades that don’t require a college education? This type of policy would help young people to make better decisions regarding their careers and vocations, and it does a better job of targeting low-income students.
Even if we are wrong about the economic injustice and irresponsibility of the policy (and we do not believe we are), it is not enough to argue that student debt forgiveness is a good idea. There are many good ideas, and we can never forget to count the costs. What other policies won’t be undertaken as a result of this program–what are what economists call the “opportunity costs”? Estimates of the costs of student loan forgiveness programs run from the hundreds of billions of dollars to over a trillion dollars. Does this program promote justice more than providing universal preschools, reducing medical debt for the poor, or increasing health care for veterans, and is it better stewardship of our resources than just allowing taxpayers to keep more of their own money? Is student debt more justifiably forgiven then other debts, like payday loans, medical debt, or mortgage and credit card debt? These are serious questions that are often unspoken in the student loan forgiveness debate. For this and all public policy proposals, Christians must conduct a careful analysis and find out where generous justice and prudent stewardship intersect.