The Education Department (ED) has just resumed repayment plans and involuntary collection of defaulted federal student loans. ED suspended involuntary collection in March 2020, as the COVID-19 pandemic began. Now ED will return to ordinary business.
The National Association of Scholars (NAS) applauds ED’s decision. Basic justice dictates that students and parents should repay the loans they have taken out and not leave taxpayers on the hook for their debts. Worse, extended deferment of student loan debts in default is a subsidy by poorer Americans who do not go to college to those richer Americans who do go. The ED never should have suspended the involuntary collection of defaulted federal student loans—and even those who believe that exceptional circumstances justified that exemption should acknowledge that those extraordinary circumstances have long passed.
We also applaud ED’s courage. Federal student aid is a good majority of the funds that ED disburses, and it affects millions of recipients. More Americans care about student loans than they do about ED’s relations with Harvard and Columbia, because it directly affects their own pocketbooks. ED’s initiative fits America’s highest ideals of fair play and good stewardship—but it will elicit loud objections from many Americans who have benefited from ED’s COVID-induced laxity. ED risks temporary unpopularity on behalf of good governance. Americans should praise this decision for its example of leadership and dedication.
ED’s initiative is part of the very complicated issue of student aid reform. ED is undertaking this action as part of a broader agenda of student aid reform. We urge it, as it goes about this larger campaign, to follow the principles we enumerated in the Federal Student Aid portion of our suggestions to reform Federal Legislation. Of these suggestions, the most important is that students should be permitted to discharge their debts into bankruptcy and that postsecondary institutions should be required to accept responsibility for 50% of loans defaulted on by students at their institution. Student loans should not be debt slavery. Colleges and universities should have their interests realigned so that they do not accept unqualified students, which sets them up for loan repayment defaults.
When we say that student loans should not be debt slavery, we say that because the current system encourages something close to that. As our report Priced Out: What College Costs America detailed, our current system entraps students in a system of intergenerational debt to pay for college. Maintaining the current system is not kindness: it is cruelty. ED’s reforms are bracing, and they will present a significant number of students and college graduates with the shock of involuntary collection. These are necessary means to a good end: the end of a system designed to turn American citizens into hereditary debtors to subsidize our colleges and universities—who are surely the welfare queens of the twenty-first century.
We feel sympathy toward indebted students—although we also feel sympathy to American taxpayers required to pay the debts of students who frequently are richer than they are. Americans generally feel a similar tangle of sympathies, and ED therefore faces a great challenge as it navigates the shoals of this treacherous area of public policy. We think it has done well in this stage of education reform. ED’s success here promises well for future reform of federal student aid policy.
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