stu•dent debt am•nes•ty

The government owns some 90 percent of existing student loan debt.

noun

1. The era­sure of every pen­ny owed on U.S. stu­dent loans

“I feel like these loans are so ille­git­i­mate. I was conned into going to this school. They sold me a dream and I got a night­mare.” —Maken­zie Vasquez, a for­mer stu­dent of Corinthi­an Col­leges who par­tic­i­pat­ed in a his­toric ​“debt strike” in 2015

Is this a legit­i­mate pro­pos­al, or just a broke millennial’s fantasy?

The call for full stu­dent debt can­cel­la­tion has been gain­ing steam since Occu­py Wall Street, which put indebt­ed stu­dents front and cen­ter. This year, a report from the Levy Eco­nom­ics Insti­tute of Bard Col­lege made the case that it’s not just the right thing to do, but smart eco­nom­ics. The $1.4 tril­lion col­lec­tive­ly owed by 44 mil­lion peo­ple isn’t just a drag for debtors. It’s a drag on the entire econ­o­my, dri­ving down home own­er­ship and con­sumer spend­ing. Wipe it out, and the report’s authors esti­mate we’d increase GDP by at least $86 bil­lion and add as many as 1.5 mil­lion jobs annually.

Can the gov­ern­ment actu­al­ly do this?

Here’s the thing: The gov­ern­ment owns some 90 per­cent of exist­ing stu­dent loan debt, and pays pri­vate com­pa­nies (includ­ing one with ties to Edu­ca­tion Sec­re­tary Bet­sy DeVos) hun­dreds of mil­lion of dol­lars to col­lect from delin­quent bor­row­ers. Instead, it could just for­give the debt. Pri­vate­ly held debt is trick­i­er, but the gov­ern­ment could either assume pay­ments or buy and can­cel them out­right. The government’s bal­ance sheets would take a hit, of course, but the Levy report esti­mates the net eco­nom­ic impact would still be positive.

Why give a hand­out to Har­vard grads, instead of putting the mon­ey toward pro­grams that help poor people?

For starters, they’re not mutu­al­ly exclu­sive. But there’s also evi­dence that stu­dent debt amnesty would help reverse a widen­ing racial wealth gap among mil­len­ni­als. While the top 20 per­cent of earn­ers have the largest debt bur­dens, low-income minor­i­ty bor­row­ers have the high­est delin­quen­cy rates and are more like­ly to have been steered into expen­sive for-prof­it colleges.

Take Corinthi­an Col­leges, a for-prof­it sys­tem that shut down in 2015 amid alle­ga­tions that it preyed on poor and minor­i­ty stu­dents with false adver­tis­ing. The Oba­ma Depart­ment of Edu­ca­tion estab­lished a process that was sup­posed to grant loan for­give­ness to some 25,000 for­mer Corinthi­an stu­dents, though DeVos is walk­ing that back. Arguably, all col­lege stu­dents have been sub­ject to a kind of false adver­tis­ing, the idea that tak­ing on mas­sive debt is a safe invest­ment in one’s future. For mil­lions of stu­dents, that sim­ply hasn’t panned out.

Isn’t this just a tem­po­rary fix?

Yep. So let’s can­cel everyone’s debt and then make col­lege free for all.

This is part of ​“The Big Idea,” a month­ly series offer­ing brief intro­duc­tions to pro­gres­sive the­o­ries, poli­cies, tools and strate­gies that can help us envi­sion a world beyond cap­i­tal­ism. For past In These Times cov­er­age of stu­dent debt, see, ​“These Stu­dents Are Lead­ing a Move­ment for Free Col­lege in the Unit­ed States,” ​“You Are Not a Loan” and ​“Why Can’t Col­lege Be Free?”