Christian Student Loans

Is student debt forgiveness justice or a bribe?

Biden’s recent executive order to cancel up to $20,000 in student debt per person has divided a nation, with debate crossing party lines. At the heart of the problem is this fundamental question: “Is the forgiveness of student debt justice or a bribe? Does canceling student debt do justice by righting some wrongs? Or is it a thinly veiled bribe to lure votes in an election year from the 43.4 million unduplicated borrowers who would directly benefit from Biden’s executive order?

The issue of justice in the payment of student debt has serious implications for our nation as a whole. Proverbs 29:4 warns, “By justice, a king gives stability to a country, but those who are greedy for bribes destroy it.” Will canceling student debt bring much needed stability? necessary for our divided country, or will it tear us apart?

Whatever your stance on canceling student debt, there is no doubt that student debt, due to its enormity, has exploded into a national crisis. To put the scale of student debt into perspective, federal student loans currently have a total balance of $1.6 trillion, an amount roughly equivalent to the $1.66 trillion in net income taxes collected. for all of 2021 by the IRS. (According to the 2021 IRS Complete Data Book release, net taxes were $1.66 trillion, including $1.29 trillion collected from personal, estate, and personal income taxes. trusts, and $0.37 trillion collected from tax-exempt corporations and organizations.)

Outstanding federal student loans are twice the size of all credit card debt, second only to mortgage debt among all categories of US debt. But unlike a mortgage, student debt doesn’t have a roof over your head.

Worse still, unlike all other categories of debt, student debt cannot be erased by bankruptcy. This exception started out as a simple pragmatic matter, because no one would lend money to someone who, more likely than not, was straight out of high school and had no income or collateral. How much less if that person could just declare bankruptcy after graduating, leaving the lender to foot the bill?

So, while there is no doubt that student debt is a huge problem, until recently there was no question of who should foot the bill. The borrower is responsible for his debt, often at his own risk. Solomon’s warning, “the borrower is the slave of the lender,” has stood the test of time.

So far. Biden’s current proposal targets federal student loans exclusively, forgiving $10,000 per individual, rising to $20,000 for Pell Grant recipients. And while there are income limits — $125,000 adjusted gross income for single people or $250,000 for married couples filing jointly — 95% of debt holders meet those limits. Barring legal challenges (Katie Lobosco, CNN, 10/12/22, judge hears case on whether Biden’s student loan forgiveness can go ahead), the loan forgiveness program is expected to come into effect in January 2023, when the multi-year COVID-19 pandemic freeze ends.

Is student debt cancellation fair? When it comes to justice, that is, determining what is fair and just, people usually argue for equality or fairness. Equity argues that everyone should receive an equal share of rewards or costs, regardless of merit. Equality, on the other hand, argues that merit matters: results are based on inputs. For example, pay more for more work.

Obviously, student debt forgiveness does not treat everyone equally. Those who benefit to cancellation of student debt must have:

  1. went to college
  2. borrowed money from a federal loan program, and
  3. left student debt unpaid.

Those who do not benefit are the opposite: those who

  1. have not went to college
  2. not borrowed money from a federal loan program, or
  3. have not left an unpaid student debt.

In the case of Biden’s debt cancellation program, people are not only being treated unequally, it’s as if the opposite of merit matters. Indeed, the greatest disparity is between those less fortunate, in the sense that they did not go to college, or those who accepted the responsibility of paying for the cost of their college education.

Although it does not meet any standard of justice, Biden’s executive order for student debt forgiveness has a passionate following. I met several of them last week at an accounting research conference in the Pacific Northwest, where a handful of voice accounting professors from 10 universities in attendance shouted my criticism of the injustice of the decree. These teachers favored equity: one focused on equality of outcome rather than equality of opportunity. For this unruly crowd, the only acceptable solution was the equal outcome of no student debt for anyone. Only by canceling all student debt can we have true equality. If only they dug a little deeper, they would find that even Karl Marx rejected the idea of ​​equality of outcome, acknowledging that it was a death knell even for communism, as no one would be incentivized to work.

Promoting equality of outcome instead of equality of opportunity runs counter to standards of distributive justice. So if Biden’s loan forgiveness order isn’t fair, what is? Is it a bribe? And if it is a bribe, how should Christians react?

In the proverb above, it should be noted that it is the recipient, not the giver, of the bribe that tears their country apart. It is “those who are greedy for bribes” who destroy it (Proverbs 29:4).

God warns us, “Do not accept a bribe, for a bribe blinds those who see and distorts the words of the innocent. (Exodus 23:8) It is the recipient of the bribe who is blinded.

As Christians, we should not be greedy for bribes because they blind us to injustice.

I’ve lived through many financial crises, from the bursting of the stock market bubble to the Great Recession, and I’ve discovered that when it comes to accepting responsibility, we tend to blame others, for our government to our president via the opposing political party. . But it is we who must accept responsibility. After all, the understanding that we are the government – ​​“for the people and by the people” – is ingrained in any democracy and that it is we who must curb our appetite for unfair payouts.

In the United States, we’ve come to love our bribes, whether it’s accepting payment after payment during the COVID-19 pandemic, or pardoning billions (or even trillions!) of student debt. The result we are left with is an explosion of inflation – “too many dollars for too few goods” – unaware or indifferent that this is clearly the wake of the Titanic-sized checks we have written ourselves. , without thinking about reimbursement, which devalues ​​our currency.

No amount of interest rate hikes from the Federal Reserve can stem the growing inflow of dollars. Because someone always pays. The only question that remains is: will it be fair?

John Thorton is the LP and Bobbi Leung Chair in Accounting Ethics at Azusa Pacific University, and author of Jesus’ terrible financial advice: Turn the tables on peace, prosperity and the pursuit of happiness.

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