While the United States faces a student loan debt crisis, proposals to forgive student debt are expensive and disproportionately bail out upper-income borrowers. They also would encourage future students to borrow more than they would have otherwise and attend more expensive schools, leading colleges and universities to raise their prices.

Policymakers should give each student borrower a $5,000 refundable credit. That would wipe out the debt of borrowers who struggle the most with debt repayment, who generally have small balances, often because they did not finish college.