March, 2020
Washington – Anyone who has been trying seriously to stay well-informed in recent years (as opposed to seeing public affairs as entertainment) knows that a global pandemic was possible and even probable. Now we have one.
Likewise, it was all too predictable that the nation's student-loan crisis will not be solved by government cancellation of the enormous debt, regardless of its overall positive economic effects. That idea, proposed by several candidates for public office, has met with strong opposition from those who see inequities in it between those who borrowed heavily and those who did not, and between those who can well afford to repay loans and those who cannot.
The challenge is to come up with a way to ease the student-loan crisis significantly, but in a way that will meet equity expectations so as to win broad public support.
I offer again the idea of relief for those who have been adversely affected by increasingly unaffordable college tuition in the past two decades, whether they borrowed or not. Congress could pass a Tuition Premium Tax Credit based not on amounts borrowed, but on college and vocational credits earned. The credit would be refundable and means-tested. To establish a premium baseline, the U.S. Department of Education would calculate a national average tuition premium for each year in the 21st century representing the additional burden faced by this century's learners compared to the previous generation. The IRS would publish a tax table showing yearly premiums against college credits earned to determine tax credit amounts.
This federal tax credit would provide equity between generations, between borrowers and non-borrowers, between attendance at low priced institutions versus those higher priced, and, because the tax credit would be means-tested, between recipients and taxpayers. Borrowers could use their tax credits to pay down loan balances.
Congress should also pass student loan bankruptcy reform (S.1414 and H.R.770), so student debt is treated as are other kinds of debt. Republican John Katko leads the effort in the House, Democrat Dick Durbin leads it in the Senate.
A refundable Tuition Premium Tax Credit established immediately would inject resources into our pandemic-weakened economy, helping both the employed and the unemployed while simultaneously alleviating the student-loan crisis that weighs heavily on millions who are now being doubly squeezed by both debt and disease. This tax credit would be preferable to a payroll tax cut, as it would reach better into the interstices of the huge gig and loan-forbearance economies, as well as be better targeted because of its means test. It could win bipartisan support.
