Should a Biden administration unilaterally forgive student debt?

On the one hand, higher education has grown into an ugly mechanism for transmuting the hopes, dreams, and fears of young people into revenue for a sanctimonious, often destructive, industry, via a debt overhang that ruins lives. With legislative gridlock likely in 2021, forgiving Federally held student debt is one of the few ways that a Biden administration could make a direct, material, positive difference in people’s lives. The President could do it with the stroke of a pen.

On the other hand, the potential side effects seem terrible. The Democratic Party is trending towards becoming a party of the educated professional class alone. I view that as a horrible development we should move heaven and earth to reverse. So long as we are (miserably) a two-party system, the complement of a professional-class party is a fascist party. The Republicans we detest are the obverse of what we are allowing ourselves to become. Letting the working class remain in hock — underwater on unforgiven credit card debt, kiting paycheck loans to feed the kid and make the rent — while we unilaterally forgive higher education debt strikes me as an almost cartoonishly perfect wedge issue to polarize the college and noncollege elements of the Democratic electorate. Republicans would ruthlessly demagogue and exploit student loan cancellation to build their new “multiethnic, multiracial, working-class coalition.”

On technocratic rather than political grounds, there are big problems with just forgiving student debt. Come next fall, an unreformed higher education finance system will remain. Kids will sign on the dotted line for new Federal loans, just after the last round has been wiped away as a remedy to the same predatory regime they are joining. Will the obligation embedded in those new loans be legitimate, then? Regardless of where you stand on that ethically, will there be an incentive to max out loans — rather than spend out of family means, or take work to minimize indebtedness — on the theory that new debt might be forgiven in a next round students (and their families) might reasonably predict? Will that end up harming kids even more, if a second round of forgiveness fails to emerge? If a new round of forgiveness does appear, will it end up being perceived as a grift by well-to-do families, many of whom may have suddenly opted to finance college with debt rather than out of savings?

For all of this, I can’t persuade myself to simply oppose unilateral forgiveness of student debt. The last thing Democrats need is, yet again, to find technocratic grounds to persuade themselves not to directly, materially help humans desperate for relief.

My suggestion (which owes everything to a conversation with the remarkable Carlos Mucha) is that Democrats push for what Steve Keen describes as a “modern jubilee“: a flat per-capita transfer to citizens and permanent residents that must be used to pay down debts. Any balance that remains after debts are repaid becomes money recipients can bank. (Mucha suggests this difference be remitted as savings bonds, which could be structured to mature over time in order to prevent a destabilizing spike and then withdrawal of new spending power.)

Ordinarily, this kind of jubilee would be unlikely to get through a Republican, or even closely divided, Senate. But, as we’ve seen, a Biden administration could implement part of it — an effective “pay down” of Federally-held student debt — with the stroke of a pen. My suggestion is that Democrats do that at the same time as they pass, in the House, a bill universalizing the transfers to the rest of us. They should pick a number (Mucha suggests $10K; I might go for $20K), and forgive each student their loans up to that amount. The House bill would specify that the student loan forgiveness constitutes a first tranche of payments under the proposed jubilee. The write-offs would be irreversible; student debt relief would be a fait accompli. The burden would then be on the Senate to pass the bill and resolve the equity issues, by authorizing payments to everyone else (as well as payment of any excess balances owed to student debtors). If noncollege humans get angry, understandably, that college types got bailed out and they didn’t, Mitch McConnell’s would be the number to call. The Democratic coalition would be ostentatiously fighting like hell so they get theirs too. Instead of letting student debt relief become a wedge by which Republicans can even further peel the working class from the Democratic coalition, this would flip the table. Relief to some would be a done deal. Republicans’ choice then would be to complete the work, or to leave desperately felt, easily remediable, inequities unremedied, against a Democratic Party fighting for the working class.

This proposal would not reform the predatory grift that higher education finance has become, alas. But it wouldn’t place existing system in a strange netherworld, either. Student debt would not be specifically delegitimized; it would become just one of many forms of debt per-capita transfers might pay down. The proposal would not create counterproductive incentives to expand indebtedness, student or other, in hopes of profiting from future forgiveness. As a tactic, the proposal represents a useful compromise between barreling headlong towards an “imperial Presidency” or accepting the gridlock of a dysfunctional legislature. The President would not, by the stroke of a pen, try to give himself just what he wants, and then hope for legislative and judicial acquiescence. Instead he would overcome the status quo bias of Congress by upending the status quo in a way that demands legislative action. The comfortable in Congress would be forced to act, if they are to retain their comforts. They can’t win by just pocketing inertia.

What do you think?

Update History:

  • 18-Nov-2020, 3:45 p.m. EST: “…yet again, to find technocratic grounds to persuade themselves not to directly, materially help humans in need of desperate for relief.”; “the same predatory regime they will be are joining.”
  • 27-Dec-2020, 6:35 p.m. EST: “Student debt would not be specifically delegitimized;”

16 Responses to “Jubilee”

  1. Ramanan writes:

    I appreciate the thought given in being fair to non-college-goers.

    Lots of people claiming to be lefties (they aren’t lefties, just neoliberals ) absolutely fail to understand it and some who are more openly neoliberal can see it.

    About the point on savings bonds: people can anyway buy bonds or put the funds in savings deposits, so the idea of bonds causing drainage of demand is not the case. There may be some effects because of interest. Keynes discussed it in the “two-step process”.

  2. Michael Brazier writes:

    Sorry, no. Any proposal that leaves the grift in place is a bad idea, and any proposal to transfer student debts to the general taxpayer would be an outrage. It isn’t just the working class who don’t go to college who’d be up in arms — everyone who saved money to pay for their children’s education, so they wouldn’t end up in massive debt, would be cheated by this, and feel betrayed.

    For this specific suggestion: these per-capita transfer payments can’t be conjured up out of thin air, no matter what form they take. They will come from either federal taxes, or federal debt (most likely the latter.) In either case they will be transfers from the prudent and careful to the imprudent and foolish: a gift to the educated professionals at everyone else’s expense. Trust me, it will be seen as such — and destroy the Democratic coalition.

    The only proposal I’ve heard of that serves the end of justice is, to take the money for repaying the debts from the colleges that originally accepted it. It is they who benefit from the present state of affairs, and they who should have to pay for the suffering it creates. On the other hand, they are also the core of the educated professional class, so no Democrat would support that proposal.

    The real point of the push for student loan forgiveness is to keep the colleges’ grift going, while reducing the immediate pain it creates, by spreading the debt burden to the general population. Thus it should not be contemplated. The grift itself must stop.

  3. AG writes:

    Re 2: Not that it will every happen, but a tax of tuition (and fees), earmarked towards student loan forgiveness, actually sounds like a pretty good idea. It might even trigger a race to the bottom as far as tuition prices go, effectively resulting in free college in some circumstances.

  4. Will writes:

    I think the dichotomy presented here of “college degree = professional-class” needs re-examined. Those are the traditional lines on which the partisan cultural battle is waged in the Kabuki theatre of the cable news networks, but in reality, there’s a large and growing debt-burdened over-qualified working class.

    Also, speaking as someone who learnt a construction trade instead of going to college precisely because I balked at the cost and low potential ROI… I wouldn’t be spitefully mad at the people who got their debt lifted off their shoulders, as many have proposed I might, but I WOULD be mad at whoever left the extortionary system in place.

  5. MJM-WA writes:

    First off… great essay.
    I totally agree w/ MB’s comments. The current situation is a nightmare, but payoffs like this to the education constituency would be a horrible solution and reflective of pathetic inability of our leaders to do anything but throw money at problems.
    I think we need a very concerted effort to provide certification options to students that don’t require the time and expenditures needed for 4 year degrees. Why do students need four years of accounting classes if they wan to learn basics needed to work in an accounts payable function or Manufacturing costing? Why do students need 4 years for design degrees when the basics in various areas can be acquired quickly and the rest learned on the job? The 4 year degree requirement is the core of the higher education grift.
    And this is also sanctioned by the non-profit tax status of the universities. The price discrimination technique —count the difference between stated tuition and tuition charged as a contribution to the students— is laughably inane in such a way that only highly “educated” people can fall for this. Use Robinson Patman to forbid price discrimination, and post the one price to be paid by all. Eliminate the taxpayer subsidy. And while we are at it, why aren’t we taxing the hell out the endowments at these universities?
    None of this will happen, of course. Instead our “great” universities will continue to turn out highly indebted inhabitants of the tent homeless cities here in the Pacific NW.
    And to think we applauded Obama for his attacks on the for-profit universities!
    What an awful travesty.

  6. Anders writes:

    Nice idea, but I think Senate Republicans would block it, ostensibly for ‘fiscal responsibility’ reasons.

    Yes, being seen to block a universal jubilee might be tough for a short while, but it would be worth it for the prize of being able to paint the Democrats as both pro-graduates and fiscally irresponsible.

  7. Steve writes:

    I think it’s a mistake to buy into the republican framing for this issue. Republicans are certainly angry about the idea of people getting their debt forgiven, but the polling I’ve seen shows that the demographic which is most against it is making 100,000 a year or more. That said, I think it’s a great idea to use Biden’s ability to do this unilateraly as pressure to advance more comprehensive progressive policies.

  8. George writes:

    It sounds like what you’re proposing is simply a second round of stimulus checks, except twenty times larger than the last. That would place the cost of such a bill in the neighborhood of $5 trillion, which is currently larger than the entire federal budget. This seems unlikely to pass under either party.

  9. Ryan Turner writes:

    > Come next fall, an unreformed higher education finance system will remain.

    No, it will be worse than before. If you think the cost and excesses of education are bad today, just imagine what it will look like when both the universities and the students are convinced someone else is paying.

  10. Jessica writes:

    This is a brilliant idea. It solves the equity issue, disarms those who will try to make that the main issue, and maneuvers the Senate Republicans in a way that gives the best chance of their going along with the plan.
    I strongly suspect that they wouldn’t go along, that they will be far too much in scorched earth mode to allow anything positive to happy, but it would be worth a try.
    Whether the Democrats would even try would be a good test of who whether they really are well-meaning, but just not quite so competent or courageous or alternatively they actually are the enemy no matter how fashionable the sheep’s clothing they wear.

  11. Eli writes:

    Letting the working class remain in hock — underwater on unforgiven credit card debt, kiting paycheck loans to feed the kid and make the rent — while we unilaterally forgive higher education debt strikes me as an almost cartoonishly perfect wedge issue to polarize the college and noncollege elements of the Democratic electorate.

    Credit card debt and payday loans may not be forgiven but they are dischargeable in bankruptcy, and many millions of debtors have taken advantage of that. Forgiving non-dischargeable student debt would only be making things a bit more even.

    I truly do not understand this compulsion to negotiate against one’s own position. Trust me: the Republicans will do a fine job of attacking any proposed debt relief. There is no need to do their work for them.

    (I dropped out of community college after a year with no debt and hold no degree of any kind.)

  12. Greg writes:

    I agree that some sort of transfer should be made to everyone, not just student loan holders. One thing that could be done is a reduction in loan principle on a car or home loan for those carrying no student debt. Alternatively a 5000 dollar tax credit can be given for 5-10 years to those with no other debt. For five January’s in a row you have a cool 5 grand deducted from your tax bill which will probably give most people at least a net gain of 3-4000. The tax credit option would not have to be tied to debt reduction but by giving it over multiple years the inflationary or moral hazard aspect of it can be limited.

  13. Greg writes:


    Your claim that the transfer would be from the prudent to the imprudent is staggeringly ignorant. People trying to improve their station in life and simply having to pay the market price for it, and thus need to take on debt because their parents don’t have a trust fund for them are not the villains here. They didn’t create the macro economic conditions that make even college educated jobs 40,000$/yr jobs. If there wasn’t this greed by the ownership class that treats every employee as a cost to cut any time a profit projection isn’t realized then maybe people could make a rent payment and a student loan payment and grocery bills and a car payment and a health insurance payment. We the people, the working people, are not responsible for the macroeconomy, we are victims of the game that is being fought amongst the super rich across the globe. We simply have to pay what they charge and work for the wage they offer……. unless we unify and say …..ENOUGH

  14. Detroit Dan writes:

    I remember Carlos Mucha from the early days of my exposure to MMT, about 10 years ago. He was behind the concept of the trillion dollar coin. I’m glad to hear he’s still in the discourse along with people like Steve Randy Waldman.

    I like the ideas in the original post, and there a lot of good comments here also. My experience going back to the trillion dollar coin discussion 10 years ago is that Obama/Biden Democrats will not even consider such wacky, outside-the-box thinking. Nothing I’ve seen from the Biden 2020 campaign leads me to the think they’ve changed.

    Biden strikes me as an aging figurehead, and there will be a furious battle behind the scenes to set policies such as this, so who knows?

  15. The Heretic writes:

    Any bailout always creates an expectation of a future bailout. It does not matter what language you use, or how you act to protect the integrity of the various parties involved. However I applaud the sentiment, that is to save the citizens of America from a finance predatory regime via the combination of job loss, job predatory, and unplayable debt. Furthermore, anything that has the potential to further foment a cultural war, even if it is used to embarrass the republicans, should not be used, unless for a really big game changing purpose. See below…

    The best solution… Address the structural issues that cause people to go into debt (bad and low paying jobs, brutally expensive of healthcare) the means by which they financially hang themselves….while doing it in a way that promotes goodwill among the various groups (cultural, ethnic, and economic classes) in America.
    America needs to spend BiG and Consitently on jobs and capitol to achieve worthwhile, democratically supported purpose . Some good examples are, save the environment and adjust for inevitable climate change, another is expose ALL the malfeasance of the finance system, especially 2008, rejuvenate the news media and battle fake news), then hire many people and pay them well. Then you need to put on heavy restrictions of finance, both to disallow finance speculation pre-existing assets (ie homes) and to disallow debt based consumption of consumer goods and services…the loss of jobs in those consumer goods and service industries should be offset by the massive increase in jobs due to America pursuing a worthwhile purpose.

  16. Erich writes:

    Not only would McConnell not in a million years allow such a law to pass the Senate, the fact that we all know he wouldn’t is enough to blunt the maneuver.

    A bystander may think something like this: “Biden knows Senate Republicans are not going to vote for the law; therefore he knows that the money transfers would never reach those without college debts; therefore what he is really trying to do is transfer money to the educated while blaming the other side for the unfair distribution, even as he always knew it was going to be unfair”. At least, I would think something along those lines, & I’m on the side that’s supposed to like it!

    That said, it’s an interesting idea, & it might’ve worked if the Senate majority leader was not so relentless.