Steve Levy: Forgiving students loans is bad policy – but if it happens, demand that colleges do this

As Joe Biden convenes his transition team, one of the top priorities on his to-do list is some type of student loan forgiveness, which was promised on the campaign trail.

Put aside for the moment how unfair this policy is to those who have already paid off their student loans or worked their tails off to avoid taking loans in the first place.

Or the fact that those who did not go to college and earn less, will be subsidizing those who did attend and are earning more.

Or how it is going to be paid for.

The big question is whether any action from Biden will tackle the underlying cause of college tuition having skyrocketed uncontrollably over the last several decades. A forgiveness program without reforming the entire system will be a failure.

That is why any college loan legislation must include a provision that requires colleges to cap their tuition if they seek to continue to exploit protections afforded to them by the federal government’s backing of the loans.

The escalating cost to achieve just a bachelor’s degree has burdened an entire generation with insurmountable debt. It is one of the reasons that younger Americans have postponed homeownership, marriage and starting a family, as well as why they have such small savings and equity.

Consider these facts: 

  • Higher education is almost 4.5 times as expensive as it was 30 years ago.  
  • Students at public four-year institutions saw an inflation-adjusted 213% increase in tuition from 1987-88 school year to 2017, while private institutions saw a 129% increase.    
  • The Federal Reserve Bank of St. Louis notes the average annual growth in wages was only 0.3% between January 1989 and January 2016, meaning university costs increased nearly eight times faster than did wages.”  
  • Approximately 45 million Americans struggle with a collective $1.4 trillion in student loan debt.  

So, before we can entertain a solution, we first must figure out what led to this massive increase. As I note in my book, “Solutions to America’s Problems,” it’s actually a number of factors, the biggest reason being the federal government’s role in dramatically expanding access to unlimited loan availability with no strings attached for the universities.

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