Christian Student Loans

The Catholic Economics of Student Loan Forgiveness | Church Life Journal

President Biden recently made the executive decision to forgive some student debt. specifically, it plans to forgive up to $20,000 of debt for Pell grant recipients (usually those with low incomes) and $10,000 for non-Pell grant recipients. In the interests of fairness, this relief will only be granted to persons earning less than $125,000 per year ($250,000 for married couples). The purpose of this writedown is to provide relief to those who have borrowed for college and yet face heavy debt, including those who never made it to a degree but are nonetheless in debt.

This remedy has been criticized on two separate grounds, both based on arguments of fairness. The first argument says that Biden’s action favors those who have gone to college over the two-thirds of adults who have not. This argument has some validity. While it may be progressive among those who have attended college (given the income ceiling and the fact that the wealthy tend to have no student debt), it is difficult to make this case for the population as a whole. The second argument says it’s unfair to those who have had trouble paying their debts. You should just pay what you owe, according to this argument. This argument seems reasonable. The problem, however, is that this would exclude any form of debt relief whatsoever. And that would call into question any form of redistribution or political initiative where there are winners and losers.

What I mean here is that debt relief is central to biblical justice. To do this, I will borrow from the first chapter of my book, Cathonomic. I will briefly discuss what the Hebrew Scriptures and the Gospels say about debt.

In the Hebrew Scriptures, obedience to God’s law meant making sure that institutions helped rather than oppressed the poor, because God is always the defender, protector and liberator of the poor. This has many debt implications. For example, the Hebrew Scriptures include a strong injunction against usury, charging interest on a loan. In an agrarian society, this would have been one of the most obvious ways to oppress the poor. In such a society, farmers would typically seek loans in the event of crop failures and other disasters that could mean the difference between life and death. The prohibition of usury lasted until Christian times and is now considered synonymous with too high interest rates.

The best-known economic injunctions in the Hebrew Scriptures relate to the various “cycles of seven”: the Sabbath day, the Sabbath year, and the Jubilee. Every seventh year was a sabbatical year, when the fields were supposed to be left fallow so that the poor could feed on them. More than that, all agrarian debts were to be cancelled, and those who had sold themselves into slavery because of their debts – a common occurrence in the ancient Near East, especially in response to drought and crop failures – were to be released.

The most radical redistribution of all occurred in every seventh Sabbatical year, known as the Jubilee year. During this year, all the requirements of the sabbatical remained in place, with the addition that any land or crop rights sold under duress or pledged to creditors since the last Jubilee were to be returned to the owners of origin. The justification was that the earth belonged to God and human beings had only conditional ownership. As Leviticus says, “The land will not be sold irrevocably; for the land is mine, and you are only strangers residing and under my authority” (Lev 25:23).

To the modern reader, these injunctions indeed seem radical. But we have to ask ourselves the question: have these laws ever been enforced? Or have they been left in the realm of wishful thinking? Some have certainly made that last claim. But in important works, Michael Hudson and David Graber claim that debt cancellations were real, common and served a valuable social purpose.

Hudson demonstrates that in Bronze Age Mesopotamia, new rulers frequently issued “clean slate” decrees, which canceled agrarian debts, freed those in debt bondage, and rescinded land confiscations. These actions would serve to restore economic balance and preserve a landed citizenship as a source of military combatants, public work, taxation and overall social stability. Without a clean slate, and given the frequency of droughts and crop failures, the credit oligarchies would have come to control the land, in turn posing a threat to royal officials. Thus, clean slates reflected an element of self-interest as well as justice.

Clean slates have mostly occurred on the accession of new rulers; it was the ancient Hebrews who made them regular occurrences, which provided an important element of predictability. They finally fell into disuse in the Iron Age, as creditors began to acquire more political power, culminating in Roman law, which we have inherited, giving supremacy to the creditor over the rights of the debtor. In a sense, we have inherited the teachings of Roman times on the primacy of creditors, far removed from the biblical notions of justice.

Debt also permeates the world and the teachings of Jesus. When he speaks the language of sin and mercy, he usually conjures up the image of debt, which would have deeply affected his listeners – poor people oppressed by unscrupulous landlords, Roman tax farmers and their local agents.

The starting point is to pay close attention to how Jesus begins his public ministry. In Luke’s Gospel, Jesus enters the synagogue in his hometown of Nazareth and reads the scroll of the prophet Isaiah. This is what it reads: “The Spirit of the Lord is upon me, because he has anointed me to preach good news to the poor. He sent me to proclaim freedom to the captives and the recovery of sight to the blind, to free the oppressed and to proclaim a year pleasing to the Lord” (Luke 4: 18-19). Again, Michael Hudson argues that people would have associated “freedom” and crushing debt and “the year of the Lord’s favor” with the Jubilee of the Hebrew Scriptures.

Hudson argues that Jesus’ fierce criticism of Jewish authorities at the time reflects unease with the legalistic mechanisms they had devised to eliminate the strong scriptural bias in favor of debtors, aligning themselves more with the legal system. Greco-Roman and its creditor oligarchies. In the synoptic gospels, Jesus teaches thirty-one parables. As a theologian Elizabeth Hinson-Hasty notes, nineteen of them refer to indebtedness, social class, abuse of wealth, distribution of wealth and compensation of workers. Jesus cared deeply about economic circumstances, and he chose the examples he knew would resonate with his listeners.

In the Lord’s Prayer, Jesus uses debt as a metaphor for sin, which David Graber says was common practice in the ancient world. the theologian David Bentley Hart argues that the second part of the Lord’s Prayer would have been understood as directly related to debt courts and debt bondage. Here is its translation: “Grant us the relief of our debts, even to the extent that we grant relief to those who are indebted to us. And do not bring us to justice, but rather deliver us from the wicked. For Hart, it is a prayer for the poor. It links the prayers to “the frequency with which Jesus speaks of lawsuits, of officers dragging the insolvent to jail, of men bound or imprisoned for unpaid debts, of ruthless creditors, of lawsuits before judges for a mantle or a coat, of the unfortunate legally despoiled by the fortunate.

It was an all-too-real social reality, in which the poor, crippled by taxes, were frequently reduced to the status of indentured tenants through expropriations and oppressive loan terms. In this account, tax collectors, usurers, and courts have all conspired against the poor, the people to whom Jesus preached freedom and the coming of the Kingdom.

We tend to forget all this today, because we live in a world of creditor primacy, where paying one’s debts is seen as a moral obligation. But in the Hebrew Scriptures and in the New Testament there was a different attitude towards debt. Too often, debt weighs on the poor, who need relief.

Isn’t it the same today? The case can certainly be made for student debt, especially since it is really difficult to discharge this debt through bankruptcy. Merely insisting on full compliance with all debt contracts would preclude any debt relief, which is not in keeping with biblical justice.

We can go further than student debt. Economists Atif Mian and Amir Sufi argued that what really caused the deep recession following the global financial crisis was excessive household indebtedness rather than financial disintermediation. But while the Obama administration was happy to bail out major financial institutions, it refused to institute meaningful debt relief for homeowners. Even the mere suggestion that mortgage holders be bailed out lit the spark for the Tea Party movement. This shows how difficult it is to implement meaningful debt relief when people associate justice with paying what you owe.

A final point: while the strict ban on charging interest on a loan has been relaxed, the ban on the wear remains, especially when this excessive interest preys on the poor. Think back to the subprime mortgage crisis, when unscrupulous lenders offered attractive “call rates” to people who wanted to take out a mortgage, with huge payments over the coming years hidden in the fine print. Consider also the high interest rates on credit card debt and payday loans, which again target the poor who often find themselves with an unexpected expense that must be financed.

To conclude, I would say that debt relief is one of the means of achieving the universal destination of goods, the notion that the goods of creation and human labor are intended for the use of all. When we think of this central tenet of Catholic social teaching, we usually point to things like fair wages, the provision of the material bases for human flourishing, and a livable natural environment. But debt relief is also part of it. It’s been from the very beginning.

EDITORIAL NOTE: Portions of this essay are taken from Cathonomics: how the Catholic tradition can create a fairer economycourtesy of Georgetown University Press, ALL RIGHTS RESERVED.