Access to higher education is one of the great equalizers in our country and we know it is a ticket to opportunity. But that access remains uneven today for people who do not come from wealthy families, and the number of people carrying life-altering student debt has been exploding for years now.

As discussed below, there are fair and manageable solutions to the problem that can set up a better system going forward, but untargeted and financially irresponsible proposals that are favored by many on the left like free college for all or mass debt forgiveness are not the answer. Before jumping in to this discussion, I have two songs from different eras to get us started: the classic What a Wonderful World by Sam Cooke and a newer one, Campus by Vampire Weekend.

Tackling the student debt crisis: There is little question that the amount of student debt today is unsustainable, exacerbating inequality, and holding back our country’s economic potential. But roughly half of the outstanding debt is held by people with higher incomes, and many who make up the other half have more manageable amounts of debt relative to their incomes.

Therein lies the problem with the mass forgiveness proposals: most of the benefit goes to people with higher incomes who do not need it. The better solution, with props to the pro bono team working with The Chicago Bar Foundation on these issues, is to take advantage of today’s near zero interest rates and give everyone a one-time opportunity to refinance their public and private student debt into one new, lower-rate plan. At that point, everyone would then pay back the debt at a rate tied to their income, with full forgiveness of any remaining balances after 15-20 years (and a shorter amount of time for people in public service).

This plan has the benefit of being more fair and more affordable for our country than the mass forgiveness proposals. Some debt would still be forgiven over time for people of more modest incomes, but that is unlikely to be materially more than what is already considered uncollectible today. At the same time, people who are putting off starting businesses, buying homes, or starting families would no longer have the weight of unsustainable student debt hanging over them, giving a big boost to the economy.   

A Better Way of Financing Higher Ed Going Forward: The fix to the current crisis is also the better way to finance higher education going forward: allowing students of all incomes to borrow what is necessary for tuition and living expenses (with reasonable caps so schools can’t just keep jacking up tuition at unsustainable rates and we don’t have professional students who keep getting degrees on the taxpayer dime), and giving everyone the option of one simplified, income-based repayment plan that has a reasonable end point when any remaining balances are forgiven. This puts people of all incomes on an even footing in access to higher education and prevents anyone from getting into a situation where their debt is unsustainable.

This new financing approach also needs to be combined with more accountability measures for schools that have poor graduation rates or post-graduate outcomes for their students.

Free College for Some: As with mass debt forgiveness, “free college for all” suffers from the fundamental problem that it is not targeted to people who need it. And it would be tremendously costly to hand out this unnecessary benefit, taking away from the many other more strategic investments our country needs right now. And lastly, not everyone wants or needs a four-year college degree to be able to succeed today.

A better investment would be to make two-year community college free to all who want it. These colleges offer degrees in many areas that can put people right to work in good jobs. These schools also can serve as stepping-stones that enable lower-income students to minimize the student debt they need to take on by starting their college careers there and then transferring to a four-year university to finish their degrees. While some higher-income people who don’t need it might take advantage of this benefit, they would be unlikely to do so in large numbers since they already are far more likely to pursue four-year university degrees.

The other way we can target scholarship assistance towards people who need it is through the tax code. For example, we could require schools to make the majority of their scholarships and financial aid need-based to remain eligible for charitable tax deductions. Many schools already do this, and it is not an unreasonable requirement for those who do not.