By Mark J. Warshawsky

Despite 70% of jobs in the US economy requiring a high school diploma or less according to the Occupational Requirements Survey, heated discussions over President Biden’s proposed cancellation of a significant portion of federal student debt of nearly $1.6 trillion currently in progress continues. Strong arguments have been made that such action would be a usurpation of the authority of Congress to set government spending. Debt cancellation would be grossly unfair to past and current students, and their families, who sacrificed by saving and working hard to pay for their education – without taking out loans – and those who have repaid their loans.

It would also be unfair to those who never went to college who, as taxpayers, would be saddled with the higher taxes needed in the future to pay for the rising federal deficits and debt that would replace the student loans on the government’s balance sheet. There is also evidence that such debt cancellation – particularly covering loans for higher education – would be a regressive policy largely benefiting high-income individuals and households. Moreover, a wealth of compelling analysis demonstrates that the existence of generous federal student loan and grant programs is the source of much of the rapid tuition inflation over the past few decades. In 2019, the average annual tuition, tuition, and room and board for a four-year college was $25,300. Subtracting consumer price inflation, this represents a real increase of 88% over the past thirty years or so.

It’s easy to say that the Biden administration’s poor policy decision to freely transfer government resources to favored and supportive groups, such as the higher education sector and young professionals living on the coasts, is entirely motivated. by politics in the face of an upcoming competitive election. . But delinquency rates had risen before the recent pause in student loan repayments. So consider the possibility that increasing numbers of individuals are saddled with student loans, that the higher incomes promised by expensive college and higher education may not materialize sufficiently to make large student loan repayments manageable, and that the current complex income-related loan repayment features, even with accelerated forgiveness for civil servants, do not work well.

There is empirical evidence that a great imbalance has developed between employers’ need for workers with university and higher degrees and the number of workers with these levels of education. The Occupational Requirements Survey, cited above, is a survey of large and small employers in the private, state and local sectors. Conducted by the Bureau of Labor Statistics and funded by the Social Security Administration for use in the occupational aspect of its disability determinations, it reveals that in 2021, 7% of jobs required an associate’s degree, 19% required a bachelor’s degree, 2.6 percent required a master’s degree, 1.5 percent required a professional degree, and 0.7 percent required a doctorate. According to the Current Population Survey (CPS), in 2021, more than 10% of American workers had an associate’s degree, 25% a bachelor’s degree, 11% a master’s degree, 2% a doctorate, and 1.6% a professional degree. Over the past thirty years, these percentages of higher education graduates have increased rapidly. For example, the percentage of workers with a bachelor’s degree increased from 15.6 to 25.4 percent, master’s degrees doubled from 5.5 to 10.9 percent of the workforce, while the number of Americans with doctorates more than doubled, from 0.9 to 2.2 percent of all workers. Moreover, over the last thirty years, according to CPS data, the salary advantage of a master’s degree over a bachelor’s degree has declined from a ratio of approximately 1.24 to 1.17, while that the wage premium for other levels of education has remained stable even though the costs of education have increased rapidly.

Given this imbalance, there may be political logic for a carefully targeted and limited reduction (not cancellation) of outstanding student loans, but such a decision must go through legislation — not executive order. And the ever-expanding federal student loan program must be reformed and massively reduced if such a reduction is not to be repeated, and the higher education sector must not continue to inflate tuition fees and award worthless degrees. sufficient.

At most, I suggest federal loans of modest amounts to cover the costs of education (subtracting all grants) at public community colleges and four years for associates and bachelors only. Higher degrees that reliably produce higher incomes can surely be funded through private loans. This will perhaps encourage the next Gates, Zuckerberg, Bezos, Dell and Musk, who have benefited society (and themselves) through their hard work, innovation and creative spirit, instead of spending time on school to pursue higher education at an early stage in their lives.

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