Over the last decade, the cost of higher education in the United States has increased by over twenty five percent, and the outstanding debt from student loans surpassed $1.5 trillion in early 2018. The outstanding debt isn’t an issue exclusive to young Americans, but is felt across all ages groups, most notably, the 35-49 year old age range. With so much pressure felt across the majority of the population, it’s no surprise that various politicians have made this issue a central part of their economic plan.
Enter two of the Democratic front runners in the 2020 election: Senators Bernie Sanders and Elizabeth Warren. In the age of increasingly polarizing politics, these two have sprung for far left economic policies of debt forgiveness. Sanders has taken a blanket approach, whereas Warren has opted for a more conservative approach, forgiving up to 95% of outstanding debt across the nation. The plans call for around $85 billion a year annually from the nations tax revenue, which would increase as well. However, this plan has not been without its detractors, as debt forgiveness has been a controversial issue since the time of ancient Greece.
Debt forgiveness has been likened to the reforms instituted by the Athenian Solon in 594 BCE. During that time, the practice of debt slavery was widespread, and economic inequality was vast (not unlike the present United States). Solon opted to cancel debt slavery and outlaw the practice, as well as cancel all outstanding debt. This had a less than ideal outcome as the economy was crippled as many people lost debt owed to them that they were dependent on. The lower classes now also had no collateral for which to take loans, which caused the economy to stagnate as there was a lack of stimulation and expansion as funds ceased to flow.
On the surface, it almost seems that the current plan for debt cancellation is similar to Solons Seisachtheia; however, there is a key difference: paying back the debtors. The plan to cancel student debt only cancels the debt to the individual, with the banks still receiving compensation from the federal government. The idea is that it would free up income for the lower classes and improve other sectors of the economy, specifically the housing market, which is the only sector with more outstanding loans than that of student loan debt. This is significantly different on an economic level than what Solon did in Athens, as it still allows for a stable economy without the massive “shaking” of the reforms.
Now, while it might not hinder the economy for the same reason as the Seisachtheia, these plans are not without their controversy or their risks. First and foremost, the increase in taxes and the expansion of national debt is a serious concern. Also, those who can afford to pay back their loans would be forgiven, and that is a friction point between classes. Recently, a man confronted Senator Warren about being reimbursed for years of savings spent on college, which she replied, “Of course not”, which bring up ethical issues about the fairness of those who planned ahead and sacrificed to put their children through college.
The bottom line is that the only major similarity these plans have is the fact that debt to individuals gets cancelled. The risks and inner workings of the student loan debt forgiveness plans and the Seisachtheia are completely different.