Public money should have public benefits. That’s a fundamental principle of good governance. It’s taught even at the Harvard Kennedy School. It means that every tax dollar that the government collects should be spent with some civic purpose in mind. A “civic purpose” can, of course, take many different forms — strengthening public safety, fighting poverty, encouraging savings and investment, promoting home ownership, and so on. Whatever the goal, the intention must benefit the broader society rather than just particular individuals.
In the case of higher education, some government programs do have a civic purpose. For example, Pell grants and subsidized loans are premised on the idea that the public benefits when more people attend college. One need not agree with that premise to accept that there is a genuine civic intent behind those policies. By contrast, the Biden administration’s partial forgiveness of student-loan debt has no civic intent, much less value. It does not promote education, work, thrift, or any other public good. It is not an anti-poverty measure unless one considers married couples earning up to $250,000 to be poor. Although some policies present a gray area, debt forgiveness is one of the purest examples of public money being spent on private benefits.
To make the contrast clearer, consider how to justify Pell grants to someone who is not a recipient: “Even though you personally will not receive a Pell grant, you should still support Pell grants because an educated citizenry has many social and economic benefits for our society.” That’s plausible enough. Now perform the same exercise with student-debt forgiveness: “Even though you personally have no student debt to be forgiven, you should still support forgiveness because . . .” That’s a tougher sentence to complete. Indeed, the White House fact sheet cites no public benefits of its new policy. It settles instead for explaining how people with student-loan debt would appreciate having it forgiven.
I am genuinely sympathetic to people who took out big loans because they were oversold on the value of a college education. Nevertheless, individuals who have been nudged into bad financial decisions should not come to expect compensation from taxpayers. Once we allow public money to be spent on private interests — the interests of either loan recipients or anyone else — the whole of government turns into a battle to decide which people deserve other people’s money. The victors will be the most politically connected groups, not necessarily those neediest. Perhaps that explains how couples earning up to $250,000 have moved to the front of the line for taxpayer largesse.