The Reality of Forgiving All Student Debt the Trump Administration Will Never Acknowledge
As the Trump administration works diligently to exacerbate the nation's student debt crisis—including efforts to insulate student loan debt collectors from regulations that aim to curtail abusive and predatory tactics—a new study out this month imagines a bold alternative that would wipe out all existing student debt in one fell swoop.
This week, both Bloomberg and NPR have reported on an internal Education Department memo, drafted under Secretary Betsy DeVos, which argues that student loan servicers and debt collectors should be exempt from state regulations and oversight, a position which industry groups have been lobbying for since President Donald Trump appointed DeVos.
The lobbying campaign has been rebuked by state officials, including 25 attorneys generals who last year sent a letter (pdf) to DeVos asserting that "these requests defy the well-established role of states in protecting their residents from fraudulent and abusive practices, plainly exceed the scope ofthe Department's lawful administrative authority, and would needlessly harm the students and borrowers at the core of the Department's mission."
Christopher Peterson, a University of Utah law professor and former CFPB enforcement attorney, told NPR that the Education Department's new perspective on state regulations, as outlined in the memo, "is a radical change." Noting that under the Trump, the department has also halted an information-sharing initiative with the CFPB, he added, "It appears that the Trump administration doesn't want anyone to focus on whether the debt collectors are treating student loan borrowers fairly."
While various states have launched probes into lenders and passed measures aimed at protecting students and borrowers—and are now contending with the possibility that Trump's Education Department may undermine those regulatory efforts—researchers at the Levy Economics Institute of Bard College recently explored an even more ambitious proposal for fixing the national crisis: a one-time federally funded cancellation of all student debt.
A summary of The Macroeconomic Effects of Student Debt Cancellation notes that researchers found such a "cancellation would have a meaningful stimulus effect, characterized by greater economic activity as measured by GDP and employment, with only moderate effects on the federal budget deficit, interest rates, and inflation (while state budgets improve)," all of which suggests "that policies like student debt cancellation can be a viable part of a needed reorientation of U.S. higher education policy."
Economics journalist Richard Eskow, writingTuesday for the People's Action Blog, praises the proposal while offering a response to critics who suggest that it's simply not possible: "To those who say we can't afford to cancel this debt, the report poses a new and different question: Can we afford not to?"
Eskow outlines how millennials are increasingly burdened by student debt, then attacked with media messages that fetishize the extreme measures some borrowers have gone to in hopes of paying down their debt. Noting the Bard researchers estimated that "cancelling all student debt this country would create between 1.2 and 1.5 million new jobs" and "increase the nation's GDP by $86 billion to $108 billion per year over the next ten years," he concludes it is time to stop punishing Americans who have bought into a predatory lending system while trying to attain an education.
"The act of cancelling student debt will benefit the entire economy," Eskow declares. "It will make us a stronger national community. And it will send a message to ourselves, from ourselves: We care about each other. We are not afraid to change. We are not afraid to set others free, and to share in the benefits of that freedom."
And as Marshall Steinbaum, research director at the Roosevelt Institute and one of the authors of the Bard study, put it, "While complete debt cancellation may appear to be a radical solution, a radical solution is what the status quo requires."