Canceling student debt may be legal but it’s theft 

The inequity of canceling student debt but no other types of debt will become more glaring.

Despite a $34.0 trillion national debt, President Joseph Biden is planning on canceling some, or all, of $158 billion of student debt of an estimated 30 million persons. This may be good politics for the Democratic Party, but this debt cancelation is unfair to most Americans.

Maybe this debt forgiveness is unconstitutional because it is done by executive order rather than congressional action; the Supreme Court will have to make that decision. But even if the court determines that student debt cancelation is legal, it will still be unfair since it treats Americans in similar situations differently.  

First, it is unfair to Americans who never went to college. Student debt is not really canceled, rather it is shifted to another group in American society as revenue lost by debt cancelation must be replaced by new taxes or increased borrowing. These new taxes and the burden of increased debt will fall on many persons who never had the opportunity of going to college. The mechanic in the local garage ends up paying for the college student who decided to major in mass media.

Second, it is unfair to students and families who made sacrifices to pay for college. There are many families that saved for college, that worked multiple jobs, that chose colleges based on affordability, and that carefully researched the best majors. They made these sacrifices and compromises to ensure that neither they nor their children would face a substantial debt burden after graduation. In retrospect, were they foolish? If only they had known that Biden would cancel college debt, they could have gone on annual vacations, bought a new car every other year, let their children choose any college regardless of the tuition expense, and study any major regardless of earning potential — no sacrifices would be necessary.

Third, it is unfair to enlisted veterans. When I enlisted near the end of the Vietnam War era, one of the motivations was to earn the GI bill to pay for college. In return for three years of active-duty service with the Marines, the GI bill paid for my Penn State degree. Although the original GI bill has gone through many revisions, its purpose is the same. It motivates smart young men and women to enlist. However, Biden’s college debt cancelation initiatives have the same effect as the GI bill without requiring military service. Do young people now believe that it was foolish to join the military to pay for college if the government was going to cancel college debt for everyone?  

Fourth, it is unfair to persons who borrow for other reasons. Why only cancel the debt of college students who made bad choices in their college and major or were unlucky? Hundreds of thousands of young people borrow to create or expand small businesses which are major sources of innovation and employment in the U.S. economy. However, about half the time, due to either bad luck or poor management, these businesses fail leaving their owners in debt or bankrupt. Why do we bail out college students who make bad choices or are unlucky while not providing similar debt relief for young people whose businesses fail? Are young people who go to college more worthy than those who don’t?

Finally, it is unfair to future generations. It is unlikely that this will be a one-time debt forgiveness. People expect that Biden, or his White House successor, will propose extended or new student debt cancelations. This will lead to further increases in the already unsupportable national debt. Students and their parents will rationally respond to student debt cancelation in ways that lead to increased debt. The military services are currently struggling to recruit enough quality young men and women. Extended debt cancelation means that the current version of the GI bill will cease to motivate these men and women to enlist. The inequity of canceling student debt but no other types of debt will become more glaring. And, in the unlikely event that Biden can credibly commit that this is a one-time cancelation that won’t be repeated, why does this generation of students get their loans canceled while earlier and later generations are stuck with paying theirs? 

Recipients of college debt forgiveness may argue that, even if canceling college debts is unfair, it is the government that is acting unjustly, not the beneficiaries of the cancelations. They are just taking advantage of the programs. In other words, these beneficiaries of debt cancelation are not themselves thieves but only receivers of stolen goods. And President Biden hopes that these receivers of what rightfully belongs to others will be so grateful that they will vote Democratic. 

Frank R. Gunter is a Professor of Economics at Lehigh University. Views expressed are of the author, not the university. For better or worse, ChatGPT or equivalent was NOT used at any stage in the creation of this editorial.