Sen. Elizabeth Warren has announced her radical plan to combat student debt. The plan, titled “Student Loan Debt Relief Act of 2019,” was the creation of Warren and House Majority Whip James E. Clyburn (D-SC).
They aim to combat student debt in multiple ways. First, the proposal will cancel up to $50,000 of student debt for people who earn a household income of less than $100,000. Second, it will allow private borrowers to convert their private student loans into federal student loans, which will allow them to be eligible for debt cancellation. Finally, Warren wants to make college free for all.
Unfortunately for Warren, the idea that a college education is the barrier separating most Americans from being successful is inaccurate. For example, the most popular majors are the ones most likely to be unemployed or underemployed . To be educated and to be educated about something useful are two very different things; there needs to be a demand for what students are being taught. Providing free college will allow the students to not react to the market and eventually stagnate our economy as a shrinking proportion of students will have educations that are valued to society.
Further, debt forgiveness, or cancellation, is not a solution. As economist Adam Smith said, “mercy to the guilty is cruelty to the innocent.” There are people who made the correct decision of not going to college that they could not afford because they were able to recognize the correct cost-benefit ratio. These people would be indirectly penalized for their good decision if student debt was forgiven, and directly penalized by the fact that they would be forced to pay the taxes that forgave the students who were not able to do the same. Inevitably, there will be an economic contraction because of this. Reallocating wealth from the innocent to the guilty will not solve the problem. Debt forgiveness is like having a full glass of water and an empty glass then attempting to fill up both glasses by pouring from the full glass into the empty one. The clear result is an empty glass and a full glass, which was the original problem.
In short, the answer to this idiotic proposal by Warren is NO! No, this plan doesn’t work. No, it’s not our fault people took in more debt than they could pay off. No, forgiving everyone’s debt is not a good lesson for future generations. No, Elizabeth warren is not an Indian and she is not a great leader either.