The Student Loan Forgiveness Mess: The Program Is The Problem
HOWARD HUSOCK
10/09/2018
investors.com
It's dispiriting, for anyone who cares about the sheer capacity of government to implement policy, to learn that the Department of Education has failed to process 99% of requests for student loan forgiveness submitted by some 1.2 million borrowers who believe they qualify for a discount program aimed at helping those engaged in public service jobs.
The report from the Government Accountability Office, based on its review of the Obama-era program, does not do much to instill more trust in government. But that's not the most important problem with the Public Service Loan Forgiveness Program.
The core idea — that government can know, by job description, what's a public service and what isn't — is itself flawed. Its fundamental problem: the assumption that only government or non-profit employment provides a public service. And it's part of a larger syndrome that's infecting private investment and even philanthropy: The idea that select causes have an inherent moral superiority that can be known in advance.
Does Gov't Serve All?
As it regards, first, the loan forgiveness program, there is no doubt that work for government, whether in a public school or a federal agency, helps to build the foundation of a healthy society. But it's narrow-minded to believe that only work for "a government organization, agency or entity at any level or a nonprofit tax exempt organization" inherently serves the public.
It is fundamentally wrong to discount the probability that working in the private sector does the same. The rejoinder that government work implies forgoing earnings hardly holds up when one looks at the sacrifices of entrepreneurs — who simply must be seen as the lifeblood of future prosperity.
More specifically, can we dismiss the likelihood that the teacher who holds a job at a for-profit trade or charter school is not serving the public? (For instance, for-profit rural grammar schools in developing countries.) So, too, with the research scientist employed by a pharmaceutical firm — not all of whom make millions but may serve millions.
It's much better to look for policy fixes to the student loan system — including looking to private lenders and repayment based on future earnings streams, not one's professions — than to make the a priori decision as to what serves the public good.
The same problem with picking moral winners has spread to investment — through the fad of "impact investing."
This burgeoning area of virtue signaling holds that only select firms — those with impact — can be said to have the potential for social and environmental improvements. The archetype firm: Solar panels sold affordably to African villagers previously without access to electricity.
The Steve Jobs Paradigm
But this, too, fails to see the forest for the trees. Steve Jobs certainly did not set out to self-consciously serve some abstract public interest. But who can doubt that the world of apps the iPhone ushered in has spurred a wave of creativity and created vast numbers of jobs which serve needs that once went unmet?
Indeed, the simple cellphone itself has done a world of social goods. One great example: The fisherman of the Indian state of Kerala, whose catch had often gone to waste before they were able to call ahead to determine which port would pay the best price — and had customers willing to pay it.
Finally, even philanthropy has fallen into the trap of believing that some causes are inherently set on a higher moral plane than others.
Charity Is Not Enough
In his forthcoming book, "Just Giving: How Philanthropy is Failing Democracy and How It Can Do Better," Rob Reich, professor of political science at Stanford, builds on his long-standing view that charities should focus chiefly on the direct needs of the poor, rather than seeking, for instance, to shape public policy.
As publisher Princeton University Press summarizes: "Charity, it turns out, does surprisingly little to provide for those in need and sometimes worsens inequality."
Reich has previously expressed skepticism about retaining the tax exemption for religious institutions, which, in his view, may simply be providing a service for members, rather than helping those in need. Reserving the charitable tax deduction for causes judged to be morally defensible is of a piece with reserving student loan forgiveness for those we believe, by the nature of the work, performing a public service.
Capital markets do a good job picking winners and losers. Using public policy toward similar ends is more likely to reflect the values of select interest groups or ideologues. More specifically, we actually manage to develop a better system of student loans, let's not put artificial limits on who should benefit.
Husock is vice president for research and publications at the Manhattan Institute, and a City Journal contributing editor. |
