Does not mean test loan cancellation. Test the age.

To my surprise, it looks like some type of action comes from the Biden administration on the cancellation of student loan debt held by the federal government.

Punditocracy said any debt forgiveness has to be means tested because we don’t want the rich to benefit from such a decision, and also, how would a plumber feel about that, or something like that ?

To be honest, I stopped paying attention to this chatter because I haven’t heard anything new about it in a while.

On the one hand, means testing makes sense because it can make action more politically acceptable and, in the minds of some, ‘more equitable’. The thinking goes that doctors and lawyers with six-figure incomes shouldn’t benefit from the pardon meant to target those who are really struggling.

I have two or three thoughts on this. First, we know from long experience that means the test always leaves out more deserving people than it excludes those who don’t need help, while increasing the overall administrative cost of delivering aid. It’s literally less efficient, and less effective.

Second, anyone with student loan debt is not “rich,” at least not yet. Rich people with well-paying jobs are the ones who didn’t have to go into debt to get those degrees. Social media is full of people with six-figure incomes who still owe as much or more than they took out in loans due to interest. Meanwhile, people without debt are rapidly falling behind their peers when it comes to wealth accumulation, and those who started with debt are unlikely to catch up. This lack of generational wealth behind them disproportionately affects minority borrowers. Canceling a student loan wouldn’t erase that wealth gap, but it certainly wouldn’t hurt.

Third, let’s say we’re overstepping the line and really giving too much help to people who don’t need or deserve help, let the really rich get some of that money. We have a method to recover this money without excluding anyone who needs it: taxes.

I am officially in favor of complete cancellation of student loan debt no because of politics or the economics of such a move, but because that would be to recognize that we as a culture and society have screwed up by allowing college costs to rise beyond the economic benefit of the degree for many those who borrowed.

I also believe it would be a catalyst for rethinking how we fund post-secondary education in the future. As I say in my book, Sustainable. Resilient. Free. The future of public higher educationcanceling the debt today to start again tomorrow is not a solution, and there is a simple enough solution to make post-secondary education more accessible to more students.[1]

But… if people really care about making all debt forgiveness “fair, that means the tests don’t go far enough.

That’s why I think any debt relief should do better than the means test.

Instead, we should age test student loan debt relief.

Student loans are a government response to making college affordable, a positive investment in its future. If we’re against people getting something they don’t deserve, why do we let everyone (like me) who went to college before it got so expensive off the hook?

Here is my proposal: We are creating a College Reasonable Expense Index based on historical college costs, then anyone who has paid more than that gets their debt forgiven.

The hard part would be finding the right number to index too, so to start, let’s try using my age cohort as an example.

According to National Center for Education Statistics datapeople like me who went to public 4-year universities and paid in-state tuition from 1988 to 1992 would have spent, on average, about $8500 total for their degree, which is almost equal to what I paid at the University of Illinois.[2]

If we decide that the $8,500 I paid in full at the end of 1992 is the base amount education should cost, we can simply adjust for year of graduation and inflation to find out what those who have debts should have paidthen cancel any amount over that.

So, for example, after adjusting for inflation, a 2012 graduate would have had to pay $13,909 for his four years of schooling. Anyone who paid more should have their remaining balance forgiven.

I guess that pretty much covers anyone who graduated in 2012, or 2013, or 2014, or 2005, or 2001, and so on, and so on.

You had the idea.

If we’re worried about the costs to the US Treasury, maybe we’ll take it a step further and make those who paid less than the base amount pay a tax. How could we understand this?

When I pitched the idea for my Reasonable College Spending Index on Twitter, Lara Schwartz, a professor at the American University School of Public Affairs and Civil Discourse Project Director suggested that a good date to index might be the average exit date of our elected officials.

It would be 1980 for our senators and 1986 for MPs. Let’s split the difference and go with the class of 1983.

If you went to a 4-year public university as an in-state student from 1979 to 1983, on average your tuition would have been just under $4,000, or less than half of what I would pay about a decade later.

This means that if we set the reasonable index for college expenses at 1983 dollars, as a 1992 grad I would owe just under $3,000 in reimbursement, just to make sure my fees academics were “fair” to someone who graduated from college in 1983. This 2012 grad would be considering a bonus of over $9,000.

But John, do you think, wouldn’t that result in a massive transfer of wealth from older to younger people in recognition of the fact that the mechanism of providing economic opportunity through education has gradually eroded until ’til it’s almost completely broken

In reality, this underestimates the advantage those who went to college earlier had given the extra years they had to build wealth on top of their lower costs. Those without debt have been allowed to start building wealth much earlier and faster, as seen in our pandemic housing market, where those who already own a home have seen a global wealth increase of over $6 trillion since 2020giving them more opportunities to pay for their children’s college education or start businesses or even buy more properties that they flip and rent out to those who cannot afford to buy.

Canceling student loan debt for people who have been excluded from this windfall seems fair enough to me, but what do I know


[1] I talk about this in detail in the book, but essentially we stop using public money to subsidize wealthy institutions and give that money to the kinds of schools that the vast majority of students attend.

[2] Even in those relatively affordable days, tuition was rising much faster than inflation, rising more than 23% from 1988 to 1992. Single-year tuition in the state of Illinois now accounts for more than double that amount.

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