Debt Relief In Context

 I've been largely agnostic about debt relief for student loans, though I thought the measure Biden approved was judicious and fair. Yglesias, of all people, actually has a decent piece on the context for the explosion in student debt.

One thing he leaves out is Joe Biden's direct contribution to this problem by prohibiting student debts from being erased in bankruptcy proceedings. That's...terrible. I'm surprised more on the Left haven't seized on this as a cudgel.

Anyway, the problem with exploding student debt in Yglesias' telling is the combination of demographics and the 2008-9 financial crisis and recession. We had a ton of 18 year olds graduating high school around that time. There were no jobs, so college seemed a decent option. You get "skills" that will pay off, and you aren't unemployed, you're a student. Spending 2008-12 in college presumably kept one out of the unemployment pool and theoretically set you up for success. However, if you graduated college in those years, you have a hole in your earnings that will never really be filled relative to your near peers. 

All these 18 year olds and all this demand for college space meant that more students went to marginal colleges. Ronna McDaniel of the GOP was Tweeting that it wasn't fair to ask middle class people to pay for Ivy League degrees. But I would guess very little of the Biden debt relief goes to Ivy Leaguers for two reasons: one is that Ivy League degree holders are probably doing fine financially and two is that the Ivies offer really generous financial aid. A graduate from Yale just isn't going to have the same level of indebtedness as someone from Quinnipiac or the University of New Haven, and they will be more likely to be able to pay it off.

It's pretty clear that the means testing and limited amount of relief were targeted at those who went to second and third tier universities that don't have the resources to offer financial aid and whose graduates are not first in line to be hired at Goldman Sachs or be admitted to Harvard Medical School. 

We've also had people talk - unironically - about how they went to college on the GI Bill to pay off their debts, so why should their tax dollars go to people who didn't serve? The issue here is that the GI Bill was originally targeted for the same macroeconomic conditions as 2008. Sure, honor veterans of the Second World War! But postwar economies go into recessions, because you have to demobilize the army and retool industry for peacetime demands. One purpose of the GI Bill was to soak up returning soldiers to keep them out of the labor pool from 1945-1950. This is precisely what Yglesias argues happened organically in 2008-12.

It's not clear that retiring part of the student debt situation will have a major measurable macroeconomic outcome. It is, of course, laughable that the GOP is objecting to deficit spending after exploding the debt every time they gain the "trifecta." However, this round of deficit spending is basically a deferred buffer against the trauma of the Great Recession. It also will make a huge, huge impact for a lot of middle class families.