adam looney

Professor, Finance Business Economics Division

Student loan policy has been a heated topic of debate, particularly following the Biden administration’s recent announcement that it will forgive up to $20,000 in debt for Pell Grant recipients and $10,000 for other borrowers, as well as encourage future borrowers to enroll in generous income-driven plans. While some support these policies as much-needed relief, others argue that borrowers who are able to repay their loans should be responsible for paying o their debt.

The challenge for policymakers is that there are elements of truth on both sides. Many of the problems struggling borrowers face were caused by harmful government practices, which encouraged borrowing at low-quality programs and in exorbitant amounts which led young students into persistent nancial hardship. But for other borrowers, their loans nanced valuable educational investments and helped them achieve economic success.

One-size- ts-all loan forgiveness policies aren’t appropriate to the complex problem of student lending, argues Adam Looney. While these policies aim to target low- and middle-income borrowers, particularly Black borrowers, those without a degree, and those who have defaulted on their loans, these policies aren't well-designed to address the speci c problems these borrowers face. While these borrowers struggle the most with their loans, “recent executive and regulatory actions are costly, poorly targeted to help Americans who struggle nancially, provide substantial bene ts to highly educated and well-o borrowers, and exacerbate negative incentives in the market for institutions of higher education,” Looney recently wrote in Congressional testimony.

The cumulative cost of recent executive actions to forgive student loans or reduce repayments are expected to be close to $1 trillion, making student loan subsidies among the largest transfer programs in the U.S. In contrast to bene ciaries of other federal programs, however, “student borrowers are better educated, earn higher incomes, and grew up in more a uent families than other Americans, particularly those served by means-tested programs. Next year, for example, 70 percent of debt will be owed by graduate students, and 39 percent by graduate students who will earn more than $100,000 per year,” Looney wrote.

Looney's insights on this topic have made him a national thought leader. He meets regularly with stakeholders and policymakers in Washington, continues to write publicly on the issue, and has testi ed three times on this issue before Congress, including at the opening hearing of the new House Subcommittee on Higher Education and Workforce Investment, chaired by Utah Representative Burgess Owens.

Looney recently turned his attention to a proposal in the Utah Legislature to eliminate the sales tax on food. While the proposal is laudable in its aims to reduce the burden on lower-income households, he argues that the policy is based on a misinterpretation of economic data on the consumption patterns of households. In reality, most of the bene t from eliminating the tax would go to higher-income households.

“A better approach is to provide low-income families an income tax credit proportionate to what they pay in sales taxes,” Looney argues. “A credit targets relief directly to low-income families, allows families to decide which necessities to spend the savings on, and more directly addresses a broader budget problem of having ‘too much’ income tax revenue and ‘too little’ sales tax revenue.”