How Can I Ever Repay You? The Borrower’s Dilemma and a Tax-Based Solution to the Student Debt Problem

Authors

Kate Souza

Abstract

The growing cost of higher education relative to wage growth means that college is no longer the sure path to financial security it once was. While the cost of tuition ballooned over the past several decades, government funding for higher education diminished. Students have made up the difference by borrowing more. For many borrowers, large student loans result in unmanageable debt that makes their financial futures less secure. Student debt also harms society and the economy. If the government wants Americans to continue to have access to higher education, it must find ways to make higher education more affordable.

Politicians recognize the problems posed by the current historic levels of student loan debt. They recently proposed to cancel large swaths of student loan debt. However, debt cancellation is not a good solution. It is expensive, unfair, and offers mere temporary relief from a problem that will continue to plague future borrowers. A better solution would offer lasting relief.

To alleviate the student debt problem, the government should allow borrowers to repay their student loans using pre-tax dollars. This would enable borrowers to keep more of their income, while incentivizing both the pursuit of higher education and the repayment of student loans. Regardless of whether President Biden or Congress cancels a portion of student loan debt, the government should ease problematic financial burdens on student loan borrowers by allowing them to use pre-tax funds to repay their debt.

Recommended Citation

Kate Souza, How Can I Ever Repay You? The Borrower’s Dilemma and a Tax-Based Solution to the Student Debt Problem, 73 Hastings L.J. 129 (2022).
Available at: https://repository.uclawsf.edu/hastings_law_journal/vol73/iss1/5