November, 2019
Washington – Analysts at Moody's Investor Services are floating the idea that student loan debt relief is, for purposes of fiscal stimulus to boost the economy, an alternative to a 2020 tax cut.
Yes.
A big obstacle, however, is the notion of equity. Why only borrowers with current balances? That gives the perception of unfairness and likely will be a hurdle against enactment.
Sixteen months ago in these pages, and again last May, I suggested a refundable, means-tested tax credit based not on current borrower balances but on a calculation of the tuition premium incurred by the college-going generations of the 21st century.
By no means would such a tax credit be a cure-all for the nation's student loan crisis. Restoration of bankruptcy protections for student loan borrowers and addressing corruption in the U.S. Department of Education are both essential. But the recent flurry of interest in using tax policy to address the crisis makes it worthwhile to repeat arguments from an earlier post:
...a means-tested, refundable federal tax credit would be more equitable for all students who went to college in the high-tuition era of the last two decades. It would avoid such problems as unfairness between those in similar economic circumstances who struggled mightily to pay off their loans and those who did not; between those who chose lower priced community colleges or less selective schools and those who did not; and between those who worked to try to pay for college over many years and those who did not. The tax credit could be called the "Tuition Premium Tax Credit," the benefits of which could be used to pay off student debt, or simply used by recipients to recover economically from the high price of college, however it affected them wherever they attended. Such a tax credit would also help remedy generational inequities. The boomer generation benefitted enormously from the long, low tuition era that made paying for college relatively easy. The 2017 tax cut piled more wealth on the boomer generation; it could be trimmed back with savings applied to generational and income-class equity.
