Last Friday, the Wall Street Journal featured a front-page article titled “The $1 Million Student Loan: ‘Should I Be Doing This?’” The article told the story of a 37-year old orthodontist with a student loan balance of more than $1 million.
There are more than 100 people like him in the United States. That’s a small number compared to all the people who owe on student loans, of course, but the number of people owing significant amounts on the fastest growing asset on the federal government’s balance sheet (more than $1 trillion, or a million millions) pose serious consequences for those borrowers, as well as taxpayers standing behind those programs.
The article notes that the number of people owing more than $100,000 has risen to more than 2.5 million. It also points out that more than one-third of borrowers in the main graduate student loan program had enrolled in federal loan forgiveness plans.
“Forgiveness” may sound like a good thing, but it depends on who is doing the forgiving, and whether they are doing it with their own money, or other people’s money.
Defending his school when asked about the case of that 37-year old orthodontist, the dean of University of Southern California’s School of Dentistry, Avishai Sadan, reportedly said, “These are choices. We’re not coercing. You know exactly what you are getting into.”
But what about taxpayers? Are they being coerced if the government chooses to forgive these loans? Do taxpayers “know exactly” what they are getting into?
Student loans are the largest asset reported on the federal government’s balance sheet. They are assets for the same basic reason banks book loans as assets—they are expected to be paid back. If they are not repaid, however, the lender doesn’t have the assets it thought it had.
Speaking of coercion, consider the following language introducing the balance sheet in the Financial Report of the U.S. Government—a balance sheet listing less than $4 trillion in assets against $24 trillion in liabilities:
"There are, however, other significant resources available to the Government that extend beyond the assets presented in these balance sheets. Those resources include Stewardship Land and Heritage Assets in addition to the Government’s sovereign powers to tax and set monetary policy."
In a sense, the USC dean may be telling the truth. As citizens and taxpayers, we are making choices when we vote.
But our “private” as well as explicitly public institutions of higher learning are relying on a claim of coercive force in a way at odds with the dean’s assertion that “we’re not coercing.”