Wharton finance professor Michael Roberts is not in favor of a plan by President Joe Biden to wipe out $10,000 in federal student loan debt for millions of borrowers, saying it won’t do much to fix the bigger problem.
Americans owe $1.7 trillion in outstanding student loan debt — a figure that eclipses both credit card and auto loan debt. The average borrower is holding $30,000 in education loan debt, or three times as much as what would be canceled under Biden’s plan.
Roberts said the proposal, which Biden is expected to make a decision on by late summer, won’t lessen the pain for individual borrowers who are carrying heavy college debt. He’s also concerned that it will shift the burden from one group of people to another. The debt cancellation proposal would cost about $230 billion, an amount that would transfer to all taxpayers.
“If there were an easy solution that I knew of, I’d be screaming it from the top of my lungs,” he said during an interview with Wharton Business Daily on SiriusXM. “It’s very easy to say, ‘Let’s just forgive the debt.’ Great, but you’re not helping the people, and you’re strapping a whole bunch of other people with that problem. I don’t know what the right answer is, but I do know what the wrong answer is. I’m not a big fan of the current proposal.”
Roberts called Biden’s plan a “blunt solution” to a very complex problem that resonates with him personally; he had to pay off his own student loans from graduate school. The larger conversation around student loan debt also brings up another touchy subject: Are students paying for college degrees that aren’t worth it?
Workers in highly paid professions such as medicine will earn enough money to pay off their debt and live comfortably, he said. “The problem really comes in when there’s a mismatch or a disconnect between the amount of debt someone is building up in school and the salary of their chosen profession.”
“If there was an easy solution that I knew of, I’d be screaming it from the top of my lungs.”
Financial Literacy vs. Financial Proficiency
In Roberts’ view, part of the solution to tackling the debt dilemma is teaching people how to make better financial decisions. That’s what he emphasizes in his instructional role with the Wharton Global Youth Program in an intensive, two-week program for students in grades 9 through 11.
Rather than focusing solely on financial literacy, Roberts said he’s on a mission to teach financial proficiency. Regardless of whether they attend college or not, young people need to know how to make practical decisions about saving, budgeting, spending, and borrowing.
“I’m not interested in financial literacy. I don’t really like the term, and I don’t like what it stands for,” he said. “I don’t want kids to be able to speak about finance in the same way I don’t want my kids to be able to speak about swimming. I want them to know how to swim.”
Roberts said he’s excited to see more state and local governments take an interest in offering financial proficiency courses for young students, but it is imperative that they get the instructional materials and training right.
“It’s important to emphasize that the goal is not to train a bunch of future investment bankers. The goal is to get people proficient with finance in a manner that allows them to make smart financial decisions in their personal lives and smart financial decisions in their professional lives.”