Analysis & Comment

Opinion | A $40 Million Experiment

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“This could be the start of what’s known in Econ as a ‘natural experiment,’” Representative Alexandria Ocasio-Cortez tweeted Sunday, referring to the announcement that a billionaire would wipe out the student debt of every graduating senior at Morehouse College this year. “Follow these students & compare their life choices [with] their peers over the next 10-15 years.”

It’s a great point. Ocasio-Cortez supports ideas like free four-year college and universal debt forgiveness. Other people (including me) are more skeptical, arguing that such plans disproportionately benefit the affluent.

But much of the debate is unavoidably theoretical. No one knows exactly how a universal debt forgiveness program would really play out. Maybe it would be a big handout to future financiers, lawyers and software engineers and wouldn’t have much influence on the careers that college graduates chose. Or maybe it would free many more people to enter professions that they would prefer, if only they didn’t have to pay off their loans. Likewise, no one knows how much student debt affects other decisions, like retirement savings and homeownership.

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The Morehouse gift — from Robert F. Smith, a technology investor — is too small (and non-random) to answer these questions definitively. But it will likely offer some insight.

“Smith is, in addition to helping individual students, funding the biggest test of the effects of student loan forgiveness we’ve seen to date,” Dylan Matthews of Vox wrote yesterday. “That enables economists (like those at Morehouse, perhaps) to conduct an analysis 10-15 years from now comparing the incomes, indebtedness, graduate attainment, etc. of members of the class of 2019 to those of the classes of 2018 and 2020.”

I remain doubtful that universal debt forgiveness is the best use of government resources, because I think it’s too skewed toward the upper middle class. But I’m open to the idea that it will have bigger, more positive effects than I expect — and open to changing my opinion if so.

Related: “A lone billionaire — or a gaggle of billionaires — will never be enough to solve our growing student loan debt crisis,” Issac Bailey writes for CNN. “We should celebrate what Smith did, not just for those 400 Morehouse students, but for the rest of us. He laid bare how we got here — and how far away we are from righting the ship.”

Anand Giridharadas says that if Smith truly cared about inequality, he would do more than give a roughly $40 million gift. He would stop supporting a tax loophole that benefits him and other wealthy investors.

“An affordable college education should not require an act of largess,” writes The Times editorial board. “It should not require our applause. It merely requires adequate public investment, funded by equitable taxation.”

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David Leonhardt is a former Washington bureau chief for the Times, and was the founding editor of The Upshot and head of The 2020 Project, on the future of the Times newsroom. He won the 2011 Pulitzer Prize for commentary, for columns on the financial crisis. @DLeonhardt Facebook

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