Millennials love to moan about their student debts, which, to be sure, can be pretty appalling. Older folks typically respond by asking why they should be required to bail them out for making bad business decisions. Who’s right?
There is plenty of blame to go around here. My thoughts are as follows:
- There is nothing inherently objectionable in requiring most students to rely on loans rather than grants. In most cases, going to college is still an investment that pays off in the long run, and there is no obvious reason to effectively transfer wealth from people who didn’t go to college, few of whom are affluent, to people who did.
- The real problems here are that: (a) the economy tanked in the Great Recession, so the job opportunities for millennials were less lucrative than they expected when they borrowed the money; (b) tuition costs have skyrocketed, largely because of increased administrative costs; and (c) there was a degree of outright fraud in some of the solicitations made by for-profit schools.
- These problems can be resolved without granting debt relief for people in the future. Gen Xers who suffered through the recession of 1992 ultimately profited from the boom of the late 1990’s and are relatively affluent today, so there is still hope for the millennials; tuition costs and job placement issues can be addressed by requiring appropriate disclosures; and there are remedies through the judicial system for fraud.
- But what should we do about the people who are suffering today? I just can’t bring myself to support some sort of massive, indiscriminate debt relief program. There should be a mechanism based on bankruptcy law to address these issues on an individualized basis. People who were effectively defrauded should be assisted in their efforts to have their debts reduced. Refinancing can be an option in some cases. Reduction in exchange for public service makes sense. But the overall objection to taxpayer funded debt forgiveness still makes sense; student loans are a business investment, and should be treated as such by the government–not as a new form of entitlement.