Republicans have a big problem when it comes to the issue of student loans, and almost no one is talking about it. Anxiety about student loans is rising, and unless they get ahead of public opinion, President Trump and GOP candidates for Congress will quickly find themselves playing catch-up to the likes of Rep. Alexandra Ocasio-Cortez, D-N.Y., and other irresponsible socialist demagogues.
In an August 2018 poll conducted by Celinda Lake’s polling firm, Lake Research Partners, two-thirds of registered voters said that the current level of student loan debt is a “crisis.” While 71 percent of Democrats predictably held this view, it was shared by two-thirds of independents and even 57 percent of Republicans.
Lest one be lulled into the hope this is a classic case of preference but not intensity, Lake Research Partners also found that 58 percent of independents and 47 percent of Republicans “strongly agree” that student loan debt levels are at “crisis” magnitudes.
The hard numbers do indicate that student loans are getting bigger over time. About 44 million Americans (1 in 3 adults) owe student loan debt, and the total amount owed now stands at $1.5 trillion. The average student loan debt for new college graduates is quickly approaching $40,000.
The Federal Reserve in November 2018 released a study comparing millennials (20 and 30-somethings) with Generation X (40-somethings) when the latter was the millennials’ age. The study found that average student loan debt doubled between Generation X and millennial graduates, even when controlling for age and inflation. A voter now in their 30s has, on average, more than twice the student loan debt a voter now in his 40s had when they were that age.
The Democrats have a pretty straightforward and easy solution that’s politically very popular: Just forgive the debt. Casting all moral hazard issues aside, it’s now pretty much standard Democratic policy to advocate the government (aka taxpayers) writing a big check to pay off student loans. It fits in well with the mass-affluent suburban constituency the party has been cultivating in other areas like school shootings and state and local tax deductions.
Republicans really don’t have anything to offer here. Instead, most of the focus has been on how whiny millennials and their mass affluent suburban parents have first-world problems and how Junior probably shouldn’t have majored in basket weaving with a minor in transphobic social networks. While that makes for satisfying cocktail party rhetoric, and there’s more than a little truth to the critique, it risks needlessly losing voters in their 30s to the easy solution proffered by Democrats.
The good news is there’s a reasonable public policy alternative Republicans can offer, and it fits squarely in with the values of work, thrift, and personal choice that the GOP should be very comfortable espousing: Employees should be allowed to choose between their 401(k) employer match going to their retirement savings or toward paying down their student loan debt.
It’s as simple as that.
An employee signing up for a new 401(k) plan at work would be asked if he wants his employer match directed to his student loan until it’s paid off. In order to get this benefit, obviously, our employee must have gotten a job — they have to work to get this benefit.
There’s no new entitlement or even tax benefit created here. An existing tax provision simply has another direction to which it can go (retirement or student loan debt paydown), and it’s up to the individual choice of the worker.
This solution, which requires gainful employment and respects the rights of workers to negotiate the compensation package that makes sense for them, is a huge improvement over the moral hazard of irresponsible debt forgiveness schemes. Democratic plans to pay off student loans en masse are less a benefit to college graduates so much as a bailout of Big Education. It would encourage colleges to jack up tuition rates, knowing full well that students would take out “loans” paid off by Uncle Sam upon graduation. Requiring debts incurred to be paid off in a way that is linked to employment, does not increase federal spending or the deficit, and avoids nanny state bailout mentalities is firm ground for the GOP to stand on.
The alternative to this or similar outside-the-box policy ideas is to cede this issue to the Democrats, and play defense on their side of the field. Eventually, that strategy results in a “Democrat Lite” GOP plan that desperately tries to play catch-up. Cases in point: the high cost of prescription drugs, pre-existing condition “protections,” etc. Republicans need to get ahead of the student loan anxiety curve before it starts costing them elections.
Ryan Ellis (@RyanLEllis) is president of the Center for a Free Economy.
