The moral of student debt cancellation – Quartz
Such proposals are likely to be very popular. A 2019 poll found that 58% of voters support cancellation of all federal student debts.
But there is those who question the idea debt forgiveness and call it unfair to those who have never had student debt or who have already paid it off.
Inasmuch as ethicist who studies the morality of debt, I see merit in the question: should we cancel student debt?
The moral case against cancellation
School debt is often seen as an investment in one’s future. Millennials with a BA, for example, typically earn $ 25,000 more than those with a high school diploma. A college education is also generally correlated with a variety of positive outcomes in life, including physical and mental health, family stability, and job satisfaction.
Given the advantages of college education, student debt cancellation appears to some as a gift for those who are already on their way to becoming well-off.
Debt cancellation also appears to violate the moral principle of keeping promises. Borrowers have a moral duty to fulfill their loan contracts, the philosopher Immanuel Kant argued, because renouncing one’s promises is a lack of respect for oneself and others. Once people promise to do something, he noted, others build on that promise and expect them to keep it.
In the case of federal student loans, a borrower signs a promissory note pledging to repay the government and, ultimately, the taxpayers. Thus, student borrowers appear to have a moral duty to pay off their debts, unless extenuating circumstances such as injury or illness arise.
The moral case of cancellation
Fairness and respect, however, also require society to address the scale of student debt today, and in particular the burdens it places on low-income, first-generation and first-generation borrowers. black.
Young people today start their adulthood with a lot more student debt than previous generations. Almost 70% of college students are now borrowing to go to college, and their average debt load has increased since the mid-1990s from less than $ 13,000 to approximately $ 30,000 today.
This explosion in student debt raises two important moral concerns, as my student Justin Lewiston and I argue in an article published last month by The Journal of Value Inquiry.
The first concern is that the distribution of costs and benefits is very unequal. Equity requires equal opportunity, like the philosopher John rawls argued. Yet while borrowing for education is supposed to create opportunities for students from disadvantaged backgrounds, these opportunities often fail to materialize due to educational challenges and wage gaps in the labor market.
Data shows that low-income students, first-generation college students, and black students have a much harder time repaying their loans. About 70% of people in fault are first generation students and 40% come from disadvantaged backgrounds. Twenty years after college, when white borrowers repaid 94% of their loans, the typical black student was able to refund only 5%.
These repayment and default rates reflect a significant drop graduation rate for students in these groups, who usually have to work long hours while in school and therefore to hire less with the academic and non-academic aspects of college.
But they also reflect significantly lower post-graduation earnings for these students, largely due to persistent social and racial wage gaps in the labor market. Black men with a bachelor’s degree earn, on average, more than 20% less than white men with the same education and experience, although this pay gap is smaller for women. And first-generation graduates typically do 10% less than students whose parents graduated from college.
A second moral concern is that student debt is increasingly causing widespread distress and significantly restricting life choices. 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 undermines both the physical and mental young adult health. It prevents young adults from starting families, buy cars, rent or buy theirs houses, and even start new companies.
Not surprisingly, these negative effects are disproportionate experienced by first-generation, low-income, black student borrowers whose life choices are particularly limited by the need to repay their loan.
Avoid moral hazard
Some analysts argued, however, that canceling student debt will create a moral hazard problem. Moral hazard occurs when people no longer feel the need to make wise 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 is therefore encouraged to adopt riskier behavior.
Moral hazard can be avoided by combining student debt cancellation with programs that reduce the need for future loans, especially for first-generation students, low-income students, and students of color.
One success story is the Tennessee Promise, a program promulgated in 2015 to make tuition and fees at community and technical colleges free for residents of the state. This program has increase in registrations, retention and completion rates, while reducing borrowing by more than 25%.
Ultimately, morality demands a forward-looking approach as well as a retrospective approach to debt cancellation.
Looking back at the original repayment promises may explain why people are usually required to pay their debts. But looking to the future will allow policymakers to imagine how canceling student debt could help create a more just society.