College Loan Costs and Congress

Among the many differences between the current generation and our parents is the fact that almost universally, we graduated from college with significant amounts of debt, while our parents did not. This has had a major effect on the choices made by people in their 20s and 30s, especially when it comes to careers and spending. As things stand today, many students who would prefer to teach in underserved neighborhoods, or doctors who would like to go into public service, or lawyers who want to be public defenders or work on civil liberties, cannot do so because those careers will not let them retire the debt acquired in college and graduate school.

While many citizens criticize "young people" for being too focused on money and "what's in it for me," they do not realize that we are simply responding to the incentives presented to us by our society. Unlike when our parents were in their 20s, for us college is expensive, job security is a joke, health insurance is a crapshoot, and Social Security is a nice idea, but not to be counted on.

During the 2000 election, the public debate was over whether the Federal budget surplus should be used to cut taxes, or preserve Social Security. There is a great quote from that Urban Institute study:

The budget resolution aims to save the entire Social Security surplus and to run a small surplus in the non-Social Security budget after fiscal year 2003. It is almost certain that actual surpluses will be somewhat less than these amounts, because the budget resolution assumes politically unrealistic cuts in domestic spending that will not materialize. - "Saving The Surplus to Save Social Security", The Urban Institute

Truer words were never written.

At the time of the surplus, some people who were not in the spotlight (because they were young) asked, why not forgive my school loans? School loan forgiveness is the essence of a good public policy move. First, it puts money in the hands of those most able to use it effectively - educated workers. Second, it enables those educated workers to make different choices when it comes to careers and consumption. Third, it rewards work. Most of the surplus the Clinton Administration left to The Executive was spent on tax cuts, and most of those tax cuts rewarded investment, not work.

Forgiving college loans insures that young people do not start out in debt, making them more able to afford cars, and homes and washing machines, without defaulting on high-interest mortgages. It is a targeted benefit to the part of the economy best able to multiply the effect of that money.

For these reasons, today's news about the "College Cost Reduction and Access Act" being signed into law is important. It begins the resumption of the successful economic policies of the 1990s Clinton Administration, which helped preserve and extend the largest post-war boom in American history. This bill is the reawakening of one of the many good ideas left from the 1999-2000 Presidential campaign, only now given life by the Democratic majority in Congress. Yet more proof that who controls Congress matters.

This law is only a first step, but it is a demonstrable change in direction for our college financing system. Furthermore, the idea of dealing with college loan debt at a national level is gaining steam in the 2007-2008 Presidential campaign, as evidenced by Bill Richardson's idea to forgive college loans after a year of public service.

We can only hope that we will see surpluses again some day, and when we do, that money can be invested in people just starting out. We did it before (with the GI Bill) and it was the foundation of our greatness. It is time to be great again.

(With a tip-o-the-hat to The Richmond Democrat for getting the college debt reduction story first!)