HUDSON | A novel idea to wrangle student-loan wreckage | Opinion

The student debt saddling millennials has produced a public policy problem like no other. With total debt having exploded to $1.6 trillion owed by 43 million Americans, it’s the economic equivalent of an iceberg where the real danger lies menacingly beneath the surface. This mountain of debt has the potential to sink the Titanic of the American economy. In fact, it’s been a silent contributor to the gradual inflation driving up consumer prices. The now 30-month moratorium on student loan payments has injected tens of billions of dollars into the budgets of families who have been spending them on consumption they were previously postponing. There’s nothing intrinsically wrong with that.

With the arrival of COVID-19 and business closures restricting employment it even made some sense but, like most hasty decisions, it has generated bizarre consequences rewarding most those who least need the help. It is expected this moratorium will be extended past the November election, just as the Trump White House did so in 2020. A resumption of loan payments would perturb, perhaps even enrage, a significant voting bloc. These bipartisan delays reflect raw political gamesmanship — wisdom and ideology be damned.

The United States Department of Education’s College Scorecard finds that a schoolteacher earning a median starting salary of $38,448 receives $264 a month in debt relief for a total of nearly $8,000. A pharmacy graduate, who makes $130,000 on average, saves $3,226 monthly for a total of $98,880 — more than enough to accumulate a down payment toward a starter home. As Andrew Gillen at the Texas Public Policy Foundation observes, “…the student loan repayment pause is perversely targeted to provide welfare for the already or soon-to-be rich.” Worse yet, the non-professional college graduate has almost certainly incorporated his or her modest salary bump into their regular spending and will find themselves severely pinched once payments resume.

Although Joe Biden promised student loan relief during his 2020 campaign, it’s become glaringly apparent that rolling back tens of thousands or more dollars of debt is unpopular with the non-college educated majority expected to subsidize such a windfall — providing comfort to those already economically better off. Blue-collar voters are another important voting bloc best not aroused. As Colorado’s Michael Bennet noted during a recent Senate campaign appearance, working-class Coloradans “…don’t need another brick to carry.” So, how did we get into this mess where even the Obamas found themselves still paying off student loans into their fifties?

Since 1962, college expenses have increased between 800% to 900% on average in terms of inflation adjusted dollars, or 12% to 15% annually. I distinctly recall my bill for room and board, books, health insurance and tuition came to $993 dollars in the fall of 1963 at the University of Maryland. The four hours I worked daily at a sub shop at the minimum wage of $1.25 provided beer and gas money at 21 cents-a-gallon. If you could land a decent summer job, it was actually possible to work your way through college. In adjusted dollars, the total cost was about $9,000 a year. There were no federal loan programs because there was no need. Today, tuition at the University of Colorado has reached $13,000 annually. Add another $16,000 for on-campus room and board and $1,200 for books — presto, you’re talking about $30,000.

If you have more than one student at college even Republicans have to swallow hard at rising costs. Loans are required. Several economists offer convincing arguments that easy availability of federal loans has actually fueled costs for higher education. It’s all well and good to point out that students are legally adults. Let’s be honest: 18- and 19-year-old students aren’t capable of fiscal sobriety, much less wisdom. Student loans have been used to fund divorce attorneys, custody battles and new cars.

Obamacare’s permission for parents to keep children on family medical insurance until they reach age 26 has enabled schools to turn health services into another profit center. My twin brother taught math for 34 years at the University of South Carolina. He showed me their new sports facility a decade ago, which exceeds the finest private gym I’ve ever seen. He explained, “we compete with Duke and Miami for students, so we need to offer four-star amenities.” Really?

We could use some fresh thinking regarding student loans. My stepson proposes an intriguing approach. Since Congress guarantees existing loans, consolidate all remaining debt into a single federal plan with a minimal service charge. Then, credit borrowers’ excess interest already paid into private plans against their outstanding principal, thereby reducing debt balances for those Shanghaied into high-interest plans. Avoid offering across-the-board debt forgiveness. Students should pay off what they owe. That seems only fair to those who have paid off or continue to make payments despite an existing moratorium.

Miller Hudson is a public affairs consultant and a former Colorado legislator.