HERE'S ONE ARGUMENT AGAINST THE CANCELLATION OF STUDENT LOAN DEBT THAT NEEDS TO DIE, AND DIE NOW!

I don't care what anybody says. This student loan thing is serious. The amount of outstanding student loan debt is somewhere in the $1.75 trillion neighborhood. Or, one trillion seven hundred and fifty billion bucks. That's the knot owed by some 43 million debtors, with the average borrower being on the hook for almost 40 grand. This debt has tripled since 2006, exceeds the combined amount of money owed on our credit cards and autos, and rivals the size of the Canadian economy. Based on current growth rates, the amount owed on student loans could increase to $2 trillion within the next couple of years, and to 3 trillion by 2038.

It can be hard to grasp numbers as large as a trillion. Think of this way: If a million dollar bill existed, I'd need one million of them in order to have a trillion bucks; a trillion, then, is one million million. Or, consider this: I live in Dallas, Texas, a city with a population of about 1.3 million. With $1.75 trillion and a desire to share, I could buy every resident in the city a million dollar crib, and still walk away with $450 billion my pocket. Well, not exactly in my pocket. But you get what I mean:

This student loan thing is serious.

In fact, it's so serious that a number of policy-makers, wonks, and justice advocates have called for cancelling all or part of the outstanding student loan debt.

So, why not just do that? Why not just get rid of the whole shebang?

A POPULAR ARGUMENT AGAINST STUDENT DEBT CANCELLATION

A major argument against cancellation--and one that's getting increasing airtime-- is this: Wiping the slate clean would disproportionately benefit high-income and wealthier borrowers. To see how some folk arrive at this conclusion, consider something like this: There's you and there's me. We both took on student debt to finance our education. You became a surgeon, while I became a teacher at a public high school. Between the two of us, it's you--the surgeon-- who's going to be carrying the highest student debt load. It's not unusual, for instance, for a doctor to roll out of the medical training pipeline owing a quarter of a million dollars. In contrast, the typical K-12 educator's student debt load probably lands somewhere in the $55-$60 grand area. Overall, as physician, your student loan debt is probably at least six times as much as that of the average college graduate.

But while your debt is much higher than mine, you--as a surgeon-- experience current and lifetime earnings that'll never see. Not working as a K-12 educator. Scale this hypothetical up to size and what you'll see is that student loan debt is an increasing function of income and or wealth. Which is just a rather fancy way of saying that, om the average, those with the biggest student loan debt burdens are those with the most education, employed in the most prestigious occupations and, especially, raking in the biggest bucks. The upshot is that it's seemingly the high-income borrowers who will disproportionately benefit from a cancellation of student loan debt. As a K-12 teacher, I'll get $55,000 wiped off my personal balance sheet while you, a a doctor, will have at least $250,000 wiped from your slate.

This is why, according to some, we need to jettison any thought of cancelling student loan debt. It's a policy, so the story goes, with perverse consequences. It's benefits, we're told, are disproportionately skewed toward the rich, rather than rest; toward the best rather than the worst off; toward the people who need the least rather than the most help. It's a policy that the opponents call regressive because, supposedly, its distributive impact is skewed toward providing those already making serious bucks with a boon.

BUT IS IT REALLY REGRESSIVE?

Nice story. One problem, though: It's wrong.

It measures the distributional impact of policy by focusing on the total amount of outstanding student l debt that different income groups owe, finds that higher income groups have more of such debt and, accordingly, concludes that debt cancellation disproportionately benefits the well-heeled.

The problem is that that is not the standard way of assessing whether a policy is regressive or not. The proper approach, as economist Marshall Steinbaum notes, is to measure a household or person's student debt as a percentage of its annual income. And on this the data is clear: Student debt constitutes a higher percentage of low-income than higher-income debtors. Measured as a percentage of annual income, the burden of student loan debt weighs heavier on lower-income indebted households. The very notion of a financial "burden" is a relative concept; whether the monthly payment of anything is burdensome only makes sense when it's anchored to some kind of referent, like income or wealth. It has nothing to do with an absolute amount that may be owed; it's always about how much of a bite that amount takes out of your income.

So, let's keep it one hundred: Cancellation of student debt is not a regressive policy. It does not benefit the better off more than the worst off. It would reduce the relative burden of student debt more for lower-income indebted households. It would lighten the burden of that K-12 teacher more than the highly paid surgeon.

The only thing perverse thing here is the persistent pushing of the misleading narrative that student debt cancellation will disproportionately benefit the people who need it the least.

One more thing. Singer and Sussman recently listed the regressivity narrative of student loan cancellation as first in their list of "Six Stupid Arguments Against Forgiving Student Loan debt."

I say that it's an argument that needs to die, and to it needs to die now.

Catch you on the flip side,

Doc Greene