PENSACOLA, Fla. (WKRG) — With the Biden administration announcing its Student Debt Relief Plan, some people are saying it is going to impact the economy, and some people are saying it is unfair to people that did not choose to go to college or have already paid off their student loans.
Hawkins said that the loan forgiveness is really a debt transfer, but the economic impact is not what most people should be worried about.
“It is a transfer from a lot of young people, who have education related debt, basically to future taxpayers,” Hawkins said. “There are two problems that are associated with this policy. The first problem is how did we get here? Student loans are supposed to be an investment in future income. So, if there is a broad group of people for whom that wasn’t a good investment, then that is the structural problem. The second problem is what we call moral hazard. Does this policy create an incentive for additional borrowing by young people because they think maybe it will happen again?”
According to Hawkins, those two problems are much bigger than if debt is transferred or not.
“Suppose I took on your personal debt, we just transferred that to me. The first question would be, how much were you out recklessly borrowing,” Hawkins said. “The second question is are you going to do it again because we just did that? Those are the questions that are much bigger and harder questions. They are fundamental questions about the U.S. economy and higher education. Some people are going to see this fair, and some people are going to see that it is unfair, and there is no real economic question there. I don’t see that there is going to be a lot of additional spending by young people.”
Another problem that Hawkins said he has seen is that college has gotten a lot more expensive than what it used to be.
“What I’m hearing a lot of people saying is that their kids’ college tuition is a lot higher than when they went to college,” Hawkins said. “Young people are feeling this need to take out bad loans and again, that is a fundamental issue in the structure of higher education. Have the operations of a college or university gotten so expensive that this is a necessary mechanism? If so, what can we do about that?”
When it comes to students that have taken out loans and are now getting them forgiven, Hawkins said it is a good thing when it comes to erasing that debt from their history.
“If somebody does erase a debt in a household financial profile, that is a good thing, but I can’t believe that $10,000 is a lifechanging amount of money for some people,” Hawkins said. “It’s a change and, of course, the recipients are going to like it and some other people are not going to like it, but I’m more troubled by why is there so much student debt that isn’t providing income for the people that took it out.”
Hawkins said there should be a return on the investment of higher education.
“Not everybody who majors in psychology needs to be a psychologist, but there needs to be a return such that, at least for a broad group of people, this investment in your own knowledge and investment in what we call human capital was a good investment,” Hawkins said. “What I’m hearing, from too many people, is that it wasn’t a good investment. As a professor at a university, that is troubling.”
At the end of the day, Hawkins said he doesn’t think there is going to be a huge spending change that is going to result in inflation.
“I do have to point out, inflation actually benefits debtors,” Hawkins said. “Usually, loans don’t fully adjust for higher prices. Inflation is what makes something that seems like something is an expensive mortgage back in 2002 seem quite reasonable now.”
UWF senior Tate Sandles said he had fully planned on paying back his $25,000 in student loans, and in fact, had already been saving to pay them off. Now, that the Student Debt Relief Plan was announced, he said he is going to take advantage of the $10,000.
“I have an unsubsidized loan, and as I am understanding, I would qualify for the loan forgiveness program, up to the $10,000 cap, because I don’t have a Pell Grant,” Sandles said. “I have already been paying off the interest on my student loans.”
He said he believes he is not the perfect type of candidate for the program, because he only qualifies because his mother is a widow now.
“It kind of worked out to where I was open to it,” Sandles said. “I had always planned on paying back my student loans, but if it is going to be taken care of, I might as well apply.”
Though he was listening to the talk about student loan forgiveness up until the announcement, Sandles said he had not given it any serious thought.
“I read The Times’ article about it, and they had surmised everything I had questions about,” Sandles said. “At the same time, I don’t really understand a lot of the financial aspects of it. I don’t understand how it will positively or negatively affect the overall debt of the nation. I just see it as a personal kind of safety net, but I don’t consider myself somebody who needs a safety net. I’m worried about the accountability that something like this brings into people like me. It was always the assumption that if you take out these loans, you are going to have to pay them back. So, I don’t understand why they are now forgiven. I’m excited that some of the debt to be forgiven, but at the same time, I don’t know where that money is coming from.”
For Sandles’ brother and sister, they both paid off their student loans completely.
“They paid their student loans off in the 90s just like I was planning on doing mine, but they probably had a lower tuition,” Sandles said. “I feel like I could have, very feasibly, under my own capability, done exactly what they did. For me, this seems like a way that people can get out of holding themselves to a level of accountability. I don’t judge anybody though. I don’t see it as an overall negative thing, I just question why it needs to be a thing in general.”
Sandles is set to graduate this year with a degree in Supply Chain Logistics Management.
For more information on the Student Relief Debt Plan, click here.