Picture the United States without student debt. It’s a country with a larger, more vibrant economy than the one we have today. It’s a country where more than a million people, including many people who never went to college, have jobs they would not otherwise have.
A new report from Bard College’s Levy Economics Institute concludes that this bold idea – cancelling all outstanding student debt – would help the entire economy and create more than a million jobs.
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?
Cancel and Grow
Using widely-accepted economic tools, the report’s authors – Scott Fullwiler, Stephanie Kelton, Catherine Ruetschlin, and Marshall Steinbaum – found that cancelling all student debt this country would create between 1.2 and 1.5 million new jobs. It would also increase the nation’s GDP by $86 billion to $108 billion per year over the next ten years.
It makes sense. More than 44 million Americans now owe nearly $1.5 trillion in student debt, and the numbers continue to grow. Individual students are graduating with levels of debt that were unknown (and are often unimaginable) to people of earlier generations. This indebtedness affects their friends, their families, their communities, and our nation.
The Millennial Poor
Millennial-led households are poorer than those of any other generation, and student debt is one of the reasons. The Federal Reserve Bank of New York concluded last year that college costs, particularly student debt, have led to declining rates of homeownership for millennials. Student debt has been linked to lower spending in other areas, too, from cars to restaurants.
The National Center for Education Statistics conducted an in-depth survey of one millennial group, the sophomore class of 2002, and found that student debt was more prevalent among females than males. It was also more likely to affect black students than students of other racial and ethnic groups. One borrower in four said they had to work more than one job, one-third said they took a less desirable job, more than one-third said they worked more hours, and 37 percent said they took jobs outside their field of study.
The Fetishization of Denial
In a very real sense, society has broken its promise to these young people. They were encouraged to attend college, and were told that their loans would pay off in the long run. That hasn’t proven to be true, through no fault of theirs. But, instead of honoring them for their effort, our media culture seems intent on stigmatizing them.
Consider this article, “4 Ways You Can Build Your Family’s Finances,” from something called “The Good Men Project.” The article offers “a few tricks” to mitigate the effect of student debt. It celebrates one “Student Loan Hero” who “discovered she could save a minimum of $2,500 per year not having her car.”
The article continues:
If you comb through your bank and credit card statements, you might find spending patterns you could potentially break. For example, maybe you thought you were spending only an average of $20 per week on coffee when it’s closer to $40 per week.
Another article, this one from Forbes, exclaims: “This 30-Year-Old Couple Repaid $120,000 Of Student Loans In 3 Years.” How did they do it? “We both work at minimum two jobs and anywhere from 60-80 hours each week,” says Ben, the husband.
His wife Danielle adds:
My husband has picked up a second job every holiday season and works about 60-70 hours per week for four months out of the year. Also, any time a one or two week project comes up with third party retailers he will take it throughout the year.
The rest of the article is a litany of self-denial: "We have a small town house with hand-me-down furniture. We haven’t splurged on anything nice for the house... The nightstand next to my bed is the box from my Kitchen Aid mixer.“
Then there’s the roommate, “a good source of income each month.”
Danielle adds, in words that might have been lifted from a 19th-century settlers’ diary: “Things don’t make a home; the people in it do.”
Punishing the Young
Ben and Danielle acted responsibly, but is that really what we want for their generation? Once, society celebrated young people who pursued education. Today we celebrate their punishment – especially when it’s driven, penitente-style, from the depths of their own self-abnegating souls.
But latte-crazed students didn’t create this problem. College education costs more in the United States than it does in any other country, by far, according to the OECD. About one-third of the 35 OECD countries charge no tuition for higher education. Another ten charge less than $4,000 per year. And some of them help students pay their living expenses.
In the US, 70 percent of college graduates have some level of student debt. The average four-year graduate owes more than $37,000. People who were unable to complete their education, often for reasons beyond their control, owed an average of nearly $9,000. Once they graduate, they face a labor economy where underemployment remains widespread.
But, hey, hold the cappuccino!
We shouldn’t fetishize student debt. These students played by the rules, and were caught in a trap that was not of their own making. We need to free them, and ourselves, from that trap.
Picture an End to Student Debt
Now let's go back to that picture in your mind of a student debt-free United States. Wages are stronger. Young people have more freedom to choose their careers based on the public interest, as well as their own education and inclination. They, and their families, have more to spend on homes and the necessities of life. (And yes, they can have a second cup of coffee.)
By this time, hopefully, the United States will have joined the most developed nations on earth in making tuition-free higher education available to everyone. That way, today’s student debt crisis can never be repeated.
The act of cancelling student debt will benefit the entire economy. 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.
(For readers who want to know more about the report’s findings, co-author Marshall Steinbaum and New York magazine’s Eric Levitz offer valuable insights.)