Page 48 - Kiplinger's Personal Finance - November 2018

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MONEY & ETHICS // KNIGHT KIPLINGER

Should all student debt be forgiven?

Q I’m hearing proposals for the forgiveness of all student t

debt—an estimated $1.5 trillion—to stimulate retail

spending, marriage, homeownership and entrepre-
neurship among the 44 million people (many of them
millennials) now burdened with having to make college- e-
loan payments. What do you think of this idea?

A Not much. There are many things wrong with how we’ve and should get their debts discharged through the classic bor-
been financing higher education in recent decades—
rower defense that they were misled and defrauded by the school.
and there are much better ways to do it—but the whole- But canceling all student debt isn’t the answer. My favorite
sale transfer of all this debt to the U.S. taxpayer, without regard reform would be making the repayment of all student loans pro-
for a borrower’s ability to repay, would be morally wrong. It would portional to the borrower’s future earnings. Monthly loan pay-
be an affront to the majority of borrowers who either have already ments would be capped at, say, 10% of earnings and deducted
paid off their loans or are managing them okay. And it would dis- from one’s paycheck, like income taxes and Social Security. After
proportionately benefit higher-earning borrowers. 25 years, the unpaid balance would be forgiven.
Yes, many students over-borrowed to attend more-expensive We should also overhaul the many public-service loan-
colleges than they needed to, or to major in fields without good forgiveness programs now in place. These are supposed to allow
employment prospects—in each case, their own choices. Yes, many borrowers who choose certain nonprofit and/or governmental
colleges took advantage of excessively easy student credit to jack
occupations, such as the military, teaching and social work, to
POON WATCHARA-AMPHAIWAN up their tuitions and expand operating budgets. discharge their debts, typically after 10 years of timely loan re-
payment. But the rules are bizarrely complex and the outcomes
And, yes, many for-profit colleges (some later closed by
often uncertain.
regulators) grew fat on government-guaranteed loans they ar-
ranged for unqualified applicants who got an inferior education
HAVE A MONEY-AND-ETHICS QUESTION YOU’D LIKE ANSWERED IN THIS COLUMN? WRITE
and often didn’t graduate. This last group of borrowers can
TO EDITOR IN CHIEF KNIGHT KIPLINGER AT ETHICS@KIPLINGER.COM.
11/2018 KIPLINGER’S PERSONAL FINANCE 13

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