Government-Funded Student Loan Debt Cancellation is an Un-American Moral Hazard

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Friday, June 21, 2019


Recently, the idea of government-funded student loan debt cancellation has been advocated for by many of the 2020 Democratic Presidential Candidates. The policy’s most vocal supporter has been Senator Elizabeth “Fauxahontas” Warren (D-MA).

Breaking down the policy in an elementary way, the government will automatically “cancel” $50,000 or so of student loan debt for middle-class and upper-class Americans. Do not be fooled, this policy will not help low-income or minority families, it would injure low-income American households. A large majority of students enrolling in four-year institutions come from high-income households. Moreover, only 14% of students coming from low-income households actually receive their bachelor’s degree.

Essentially, the policy is debt cancellation for Americans whose earning potential will place them in the higher-income categories and places a burden on the less-educated, while widening the various inequality gaps in America.

But I digress. This article isn’t a counterargument against the merits of the policy, it’s a college student’s perspective on the policy, and I believe it is an un-American moral hazard.

Myself—someone who has incurred over $100,000 in student loans so far and has another $150,000 more to take on before I complete my J.D./M.B.A. (Ehis hurts to acknowledge.)—I know what it feels like to be in debt up to my eyeballs with only more debt on the horizon. I would love for my debt to vanish. I truly would. I also would like a Saleen S7 in matte black, to eat all the pizza I want and not get fat, and to ask this a magic genie for unlimited wishes.

However, we live in a world where actions have consequences. We also live in the greatest country where one of our founding principles is individual responsibility. “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the pursuit of Happiness.” Sound familiar?

Pursuing higher education is a decision that one freely chooses to do with their life. They also have the liberty to not pursue it. Whatever one wants to do on their “pursuit of happiness,” that is their prerogative, and no one else’s. That’s the beauty of America. Individuals are left to their own devices to exercise autonomy in decision-making.

American’s are the luckiest people on Earth because they are the captain of their ship and sole-determiner of their fate. I may be beating a dead horse with this whole “individual responsibility” idea, but it cannot be stressed enough. It seems that our generation has been raised to believe that they are not a product of their own decisions, but are instead a product of the “environmental forces” against them. You don’t have to take my ultra-conservative word for it, take the ultra-liberal Bill Gates’ words, “If you are born poor, it’s not your mistake, but if you die poor, it’s your mistake.”

So, what does individual responsibility have to do with student loan debt cancellation being an un-American moral hazard?

For starters, in the United States of America, individuals are products of the decisions that they make and must face the consequences of their actions. It is not your neighbor’s responsibility to take on your debt. Students who incur loans are doing so knowingly and willingly.

People who knowingly and willingly make decisions that affect their lives are the only people responsible for what follows from those decisions. Our culture has proliferated the idea that we must get a college degree in order to be successful in our lives, whatever the degree. This is incorrect. I hate to be the bearer of bad news, but most college degrees are useless in the real world because they do not teach practical skills. You might find sociology, psychology, or communications interesting, but those majors do not translate to the workforce well.

A moral hazard occurs where a party has an incentive to take unusual risks. Its likeliness to occur increases when a party does not have to suffer the potential consequences of a risk. This current policy would affect 95% of the 45 million borrowers. That’s 42.25 million who would not have to suffer the potential consequences of the risks they willingly took. That risk would be spread out to the 209,128,094 Americans over the age of 18 166,878,094 of which were not a party to these agreements. Telling students they can attend college and not worry about the debt they willingly incur would create an abhorrent moral hazard.

Trust me, I’m all for fixing the tuition crisis and lower the costs of college. However, I took on my debt, and so did you. It is our job to deal with the consequences.

Mackenzie Bettle graduated from Arizona State's W.P. Carey School of Business with a Bachelor's in business law, summa cum laude, and is currently pursuing his Juris Doctorate at Seton Hall University. He loves business, politics, economics, law, football, and his two fluffy Havanese dogs, Jack and Kobe.

The views expressed in this article are the opinion of the author and do not necessarily reflect those of Lone Conservative staff.


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About Mackenzie Bettle

Arizona State University

Mackenzie Bettle graduated from Arizona State's W.P. Carey School of Business with a Bachelor's in business law, summa cum laude, and is currently pursuing his Juris Doctorate at Seton Hall University. He loves business, politics, economics, law, football, and his two fluffy Havanese dogs, Jack and Kobe.

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