Student Loan Forgiveness: The Libertarian Response?
Someone just sent me this over the transom letter (if you don’t know what that means, you young kid you, look it up; ok, ok, it means “offered or sent without prior agreement; unsolicited”):
Here is my response:
I’m a professor. We’re not obligated to directly answer any questions. We’re allowed to beat around the bush instead. So let me share with you my thoughts on this matter from a slightly different perspective than the one you request.
I’m a libertarian. I look at all such issue through the prism of that political economic philosophy. So I ask, should libertarians favor or oppose the government’s forgiveness of student debt? I’m of two minds on this issue as you’ll see.
With Murray Rothbard and Lysander Spooner, I regard the government as a “band of murderers and thieves.” So, I oppose anything that benefits them. They seem to think that loan forgiveness benefits them, otherwise they wouldn’t do it, so I’m against this initiative of theirs if only for that reason.
Further, as you point out, this program will benefit people who were subsidized into extra education. Then, the government will turn around and tax all people, including non-beneficiaries, to make up for this loss. As a libertarian, I can hardly favor the government taking money from one group of people, no matter what are their characteristics, and giving it to another group of people, no matter what their characteristics.
On the other hand, if we look just at this program, and avert our eyes from the government later raising taxes to finance it, we reach a different conclusion. The less money the government has, the better. This initiative will impoverish them just a little bit. Who will it enrich? Why these students who won’t have to pay off their loans. Who is a greater enemy of liberty: the government or these students? Well, that’s a no brainer. These students haven’t been taxing, regulating, murdering, stealing, cancelling, etc. At least not to anything like the same degree. So, as a libertarian, I favor a transfer of money from statists to these relatively innocent students.
Thus, we have two effects, one in favor, one against. Which one is more powerful? How should we weigh them? That is an empirical issue, not one of deontology. As a result, the way ahead for libertarians, in my view, is unclear. If an answer is demanded of me, my prudential judgement is to oppose this program.
Sep 14 2022 at 12:42pm
I’m not sure that’s a good argument to take either in general as a principle or specifically with student loan forgiveness.
As a principle, I think it is weak because one shouldn’t conceptualize government as a single entity that enjoys benefits or faces harms. Methodological individualism means that we should focus more on who benefits and who is harmed within the organization. Some politicians may benefit, some may not. In the short run, some may benefit by getting a few extra votes, but in the long run be harmed by economic issued caused by policies (voters vote with their pocketbook as much as on a single issue). So, I can point to various elements of “the government” who are harmed by such and such policy. Consequently, your principle would require you to support the policy and we would run into a contradiction (you’d have to both support and oppose the policy).
So, to speak of “the government” as a collective decision-maker makes the same mistake as talking about “society” as a collective decision-maker. The confusion rears its head quite well in the bit from your article I quoted because you’re using the word “government” but what you really mean is “Biden” and maybe “the Democrats.” The Republicans oppose this move.
Specifically regarding student loans, I’m unsure loan forgiveness will be, on net, a vote getter. On the one hand, yes some voters may, on the margin, vote for Dems. But it will also likely cost them votes, too. Do not discount the anger many are feeling about having sacrificed, done the “right thing,” paid their loans, and now feel like chumps. Yes, pecuniary externalities shouldn’t matter and sunk costs are sunk, but they still play into political decision making. I do not know which effect will be larger, so I am unclear as to the net effect forgiveness will have on votes.
Thomas Lee Hutcheson
Sep 14 2022 at 2:43pm
I wonder if there is a Libertarian view that does not depend on seeing the State as “band of murderers and thieves.” So, I oppose anything that benefits them.”
Sep 14 2022 at 3:45pm
Also, it’s a bad argument it assumes the government being a thief means it’s interests consistently conflict with the interests or rights of the people, which isn’t true. Sometimes the interests of the parasite coincide with those of the host. Because a thief saves someone from getting hit by a bus only so he can mug them afterward isn’t a good argument against saving the person from the bus.
Really, as a general rule, there is probably almost no person or institution that is so wrong that “whatever is bad for him/her/it must be good in general” is a reliable heuristic.
Sep 14 2022 at 3:55pm
This is like asking someone, “Who would you rather have steal from you?”
Sep 14 2022 at 7:55pm
Student loans should not be forgiven unconditionally. There are viable alternatives, such as income-driven repayment plans (payments based on discretionary income) or service contingent programs (loans granted in return for commitments by college graduates to work in high demand areas). We should approach the issue in the same way we do workfare vs welfare. No free lunch.
Sep 15 2022 at 5:11pm
Repayments already were income driven. Student loan repayments were limited to 10% of discretionary income. Not income, discretionary income. Now, in addition to the $10k handout to those who have the benefit of a college education over those who don’t, that rate has been lowered to 5% of discretionary income.
And all this for college students who, as graduates, have an average debt of $25,000 and make $1.2 million more over their working career than those who don’t go to college. With the limit on repayment, the burden was excessive?
What an absurd handout. And what a message about what the government is willing to do with OPM, other people’s money.
Sep 15 2022 at 1:02pm
A minor quibble but it seems inaccurate to say “the Government” is doing it. It’s not like there was a legislative act or anything.
Sep 16 2022 at 10:55am
The guarantee in the Guaranteed Student Loan program(GSL), is to the bond holder not the student. The bond holder is guaranteed his principal and interest regardless of whether the student pays or not. If anyone should foot the bill on the forgiveness, it should be the bond holder not the taxpayers. If you write down a portion of the principal on every Sallie Mae bond, then the difference is covered. Let the bond holders riot. A better second step would be to eliminate the federal guarantee on the bonds. This likely would end the program since only a fool would loan money to a child with no education and few if any prospects.
Sep 16 2022 at 2:27pm
” if we look just at this program, and avert our eyes from the government later raising taxes to finance it, we reach a different conclusion.”
Restated: If someone is harmed, but we ignore the harm, it’s not so harmful.
The debt write off is an executive order that is likely illegal, and another government power grab. The executive branch is relying on the HEROES Act of 2003, which gave relief to students in connection with war, other military operation, or national emergency. What’s the national emergency–the Democrats might lose in the upcoming election?
Sep 16 2022 at 5:47pm
Professor Block, It is the taxpayer who is harmed as there was a contract between them and the students. The Biden administration, as interfering intermediary, unilaterally abrogated that contract on wholly infirm legal grounds. See Richard Epstein’s compelling article on this in Hoover’s Defining Ideas. If contracting in a free society is sacrosanct…a libertarian principle… then this is reason enough to oppose this bailout, er, debt forgiveness.
Sep 18 2022 at 10:24pm
Interesting, hadn’t thought about this issue in these terms prior to reading this.
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