By Arnold Kling
Because of legal choices we’ve made in how to set up this relationship, it stays forever, is virtually impossible to discharge under hardship, churns fees when it goes bad, and creditors can get to anything, including Social Security, to get it repaid. Meanwhile, we have a Great Depression-like event that is throwing college graduates into a labor market that is far too weak.
This seems to be the issue du jour. If we were searching for cosmic justice, who should suffer?
I guess a lot of people are saying that the students who took out loans should not suffer. For now, let’s assume that this is correct.
Should the lenders suffer? It’s popular to hate banks, but it’s hard to see what they did wrong here. It’s also hard to see how to stick them with the tab, at least for loans that were guaranteed by the government. But punishing the government means punishing taxpayers.
If you transfer debt from students to taxpayers, it is not clear that you achieve cosmic justice. It is not even clear that you change the generational distribution of debt. Konczal is upset that even Social Security checks can be garnished to pay student loans. Is that worse than having Social Security benefits cut in order to pay off the debt that was incurred by the government when it canceled your student loan?
On the cosmic justice front, there might be something to be said for a “clawback” of past earnings of professors and administrators at colleges. But I don’t see anyone clamoring for that.
Of course, cosmic justice is always served by taxing people with high incomes. Make them pay off everyone else’s student loans, bad mortgages, free health care for all, etc. After all, it is the fault of high-income people that students borrowed all that money. Isn’t it?
I don’t think that young people who did what was normal at the time and are now suffering for it are receiving cosmic justice. But I don’t think that cosmic justice is going to happen in this world.