President Joe Biden is expected to announce $10,000 of student loan “forgiveness” for low- and middle-income Americans earning less than $125,000 on Wednesday. While the move is ostensibly to give lower-income Americans a lift in Biden’s recession, a closer look at the numbers shows it will disproportionately aid those who are better off.
According to an analysis of Biden’s plan from the University of Pennsylvania out Tuesday, such a wide-ranging bailout will come with a price tag of $300-$980 billion for American taxpayers. Furthermore, the university calculated, “Between 69 and 73 percent of the debt forgiven accrues to households in the top 60 percent of the income distribution.”https://6d58ce0d7a048c3f08548369ea10f680.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html
The school’s conclusion is supported by prior data analyzed by the liberal Brookings Institution in 2020 as Democrats vying for the presidential nomination touted similar loan forgiveness as central to their platforms.
According to Brookings, “the highest-income 40 percent of households (those with incomes above $74,000) owe almost 60 percent of the outstanding education debt and make almost three-quarters of the payments.”
“The lowest-income 40 percent of households hold just under 20 percent of the outstanding debt and make only 10 percent of the payments,” the Washington D.C. think tank published along with the chart below:
Meanwhile, students who took the loans are far better equipped to pay them off than many other American taxpayers. A typical worker with a bachelor’s degree is likely to earn nearly $1 million more over their career lifetime than the same person with just a high school diploma.
“About 75 percent of student loan borrowers took loans to go to two- or four-year colleges; they account for about half of all student loan debt outstanding,” the Brookings Institute reported in January 2020. “The remaining 25 percent of borrowers went to graduate school; they account for the other half of the debt outstanding.”
At the same time, the White House’s unilateral plans are legally questionable at best. In January last year, the Department of Education released an eight-page memo stating that the agency lacks the statutory authority to “cancel, compromise, discharge, or forgive, on a blanket or mass basis, principal balances of student loans, and/or materially modify the repayment amounts or terms thereof.”
In other words, without congressional approval, Biden’s decision to wipe out a minimum of $300 billion in student debt at the stroke of a pen is unconstitutional, according to the department.
As the Biden administration readies its fifth extension of federal student loan repayments, voter concerns over surging inflation take a back seat to the needs of Democrats’ donor class in the run up to the midterm elections.
The current student loan moratorium is set to expire on August 31, leaving the Democrats with the prospect of student loan payments resuming just two months out from an election. Democrats are almost certain to extend the moratorium again.
The student loan “pause” begin in March 2020. Yes, two-and-a-half years ago.
This policy has been a disaster: costing taxpayers nearly $135 billion while primarily benefiting the elite and contributing to the highest inflation in 40 years.
Recently a group of 180 left-of-center organizations signed a letter urging President Biden to extend the moratorium on student loan repayments. They insisted that the moratorium be extended until the administration fulfills its promise to cancel student loan debt.
This letter is filled with delusional, out-of-touch arguments that perfectly illustrate the Left’s understanding of the student loan issue.
The primary assertion by these groups is in the letter’s one bolded line: “People with student debt cannot be required to make payments toward loans your administration has promised to cancel.”
Ironically, the Left is arguing that a politician’s “promise” while on the campaign trail should be more binding than the contractual agreement borrowers signed promising to pay back their debts.
The signers also describe the moratorium and cancellation as a way to relieve the financial pressure of inflation on Americans, especially “economically vulnerable” people, people of color, and women. This, of course, is just part of the Left’s strategy to frame every policy goal of theirs as “justice” for the destitute and oppressed. This kind of framing for the student loan issue is especially shameless, though, as the student loan moratorium primarily benefits white, wealthy elites while worsening inflation for low and middle-income Americans.
About 75 percent of student loan repayments come from the top 40 percent of earners. The bottom 20 percent of earners only pay 2 percent of monthly student loan payments. As the Committee for a Responsible Federal Budget points out, the effects of the student loan moratorium is even more skewed toward elites than a blanket cancellation, as graduate student loans tend to have higher interest rates than undergraduate loans.
The Brookings Institution, whose scholars generally support student loan cancellation, described those who would benefit most from student debt forgiveness as “higher income, better educated, and more likely to be white.”
Adam Looney, a former economic advisor to President Obama, explained that, “Measured appropriately… loan forgiveness is regressive whether measured by income, educational attainment, or wealth. Across-the-board forgiveness is therefore a costly and ineffective way to reduce economic gaps by race or socioeconomic status.”
This is not very surprising. As one might assume, many low-income Americans chose not to go to a four-year, private university. Many paid their way through community college or a public university/college, went to trade school, joined the military to pay for their education, or went straight into the workforce after high school. For these Americans, the moratorium and cancellation proposals are slaps in the face. If student loan debt is cancelled, their sacrifices and hard work was futile.
Further, the letter’s assertion that student loan handouts could help ease the financial pressure of inflation on Americans is especially misguided. About 45 million Americans, or 17 percent of the adult population, have federal student loan debt. While this limited group of Americans, who already skew higher-income, may experience relief, every American is facing crippling inflation.
The consumer price index increased by 9.1 percent on an annualized basis in June, according to the Bureau of Labor Statistics (BLS), setting yet another 40-year high for the sixth time under President Biden.
A primary cause of inflation is the government’s reckless spending. The federal government is flooding the economy with so much money that demand is growing too fast for production to keep up. The moratorium on student loan repayments has been incredibly expensive: so far, it has costed taxpayers $135 billion, and continues to cost them an additional $5 billion each month.
While the Left has attempted to frame the student loan issue as one pertaining to “racial and economic justice,” it is simply a handout to the liberal elite. Lawmakers cannot allow the Left to worsen inflation for average Americans under these false pretenses.
The president's plan to forgive $10,000 in student debt per borrower has several negative consequences.
Many of the 43.3 million Americans with federal student loan debt totaling $1.61 trillion have anxiously anticipated President Joe Biden’s decision about student loan forgiveness.
Last week, The Washington Post reported that the president’s plan, which sources say is nearing a formal announcement, will resemble his 2020 campaign promise to forgive $10,000 in federal student loans per borrower. The Committee for a Responsible Budget estimates this will cost taxpayers $230 billion.
While political firebrands such as Sen. Bernie Sanders have long supported substantially increasing federal higher education spending, including offering things like free college, President Biden’s proposal would represent a significant change in policy from previous presidential administrations, including Democrats.
President Barack Obama’s 2008 campaign promises were modest by comparison. President Obama sought to expand Pell Grant access to low-income students and eliminate government subsidies to private student lenders. Even Obama’s 2014 executive order that sought to forgive some federal student loans only did so after 20 years and required borrowers to make regular payments via the Pay As You Earn Initiative.
By comparison, the Biden administration’s plan is a major departure from Obama’s more modest and measured approach to student debt. While it would certainly be popular with many of the people who have $10,000 of their student debt forgiven, public opinion is quite divided over how to handle college student debt.
A CNBC national poll conducted in January of 2022 found that 34% of respondents supported loan forgiveness for all student loans. Only 27% of respondents opposed student loan forgiveness entirely. However, 35% of respondents supported a middling approach, preferring loan forgiveness only for those “in need.”
Supporters of student loan forgiveness for those in need may be pleased to hear that President Biden’s proposal is reportedly going to be means-tested, with individuals eligible for student loan forgiveness if they have an income of less than $150,000 ($300,000 for couples).
The Washington Post editorial board notes some of the problems with that cut-off:
These provisions, while welcome, would not stop the policy from becoming yet another taxpayer-funded subsidy for the upper middle class. The president’s means test would be almost useless, as some 97 percent of borrowers would still qualify for forgiveness. The Committee for a Responsible Federal Budget, a nonpartisan watchdog, estimates that such a plan would cost at least $230 billion, that 71 percent of the benefits would flow to those in the top half of the income scale — and that a quarter of the benefits would go to the top 20 percent. Even this does not express fully how regressive the policy would be, because many recent graduates from medical, law and business schools would qualify for forgiveness even though their lifetime income trajectories don’t justify it.
Similarly, The Wall Street Journal has reported that more than 40% of all student loan debt is held by individuals with advanced and lucrative degrees, such as doctors and lawyers.
Only one-third of Americans have bachelor’s degrees. These individuals are statistically likely to earn more than the two-thirds of Americans who don’t have those credentials.
This means that many taxpayers nationwide, 85% of whom do not have student loan debt, would now be paying off the student debt of their college-educated peers who, in many cases, enjoy greater affluence because of their college degrees.
Importantly, this loan forgiveness proposal does not actually address the major problem of rising college costs. Biden’s plan would likely only exacerbate what many have labeled the student debt crisis.
The American Enterprise Institute’s Beth Akers points out that there will definitely be a change in borrower behavior after any sort of debt reduction. She wrote:
“Economically rational people will respond to that dynamic by choosing more expensive programs of study and borrowing more than they would have otherwise. The result: a pool of outstanding student debt growing even more quickly than before.”
This means that Biden’s proposal would incentivize future students to invest in riskier loans under the hope or assumption that their loans could later be forgiven. Such a plan is a disaster in the making that, over the long-term, could significantly expand Americans’ already ballooning student loan debt.
In fact, even if President Biden does reduce student loan debt by $10,000 per borrower, the Committee for a Responsible Budget reported that the total student loan debt would return to its current level in just three years, assuming no change in borrower behavior.
Instead of debt reduction, policymakers should consider reforms that have a lasting effect and address the rising cost of college. Extricating the federal government from the student loan business altogether or placing strict annual and lifetime caps on federal student loans could help encourage universities to stop hiking their costs.
At the end of the day, any sort of student loan forgiveness is a bad policy since it does not hold individuals accountable for their financial decisions. In fact, it would represent a massive betrayal of public trust. Many people worked to pay off their student loans. Others chose less expensive colleges to avoid student debt. Some people didn’t go to college at all because they decided they couldn’t afford it.
It may be well-intentioned, but President Biden’s student loan forgiveness plan is a recipe for disaster. It would potentially encourage bad borrowing behavior going forward. It would disadvantage those who made significant sacrifices to avoid or minimize their student debt. And, perhaps worst of all, it would force American taxpayers who didn’t go to college to pay for student debt they chose to not accrue and from which they will not benefit.
I joined the Marine Corps two weeks out of high school, deployed to Afghanistan, and earned my degree using the GI Bill
By Fox News•
As President Biden considers forgiving student loan debt, there are important factors to consider, including the impact on our military and veterans who earned opportunities to pursue an affordable college education.
For most veterans, the choice to join the military was foremost about serving our country. But for many, it was also about receiving benefits to attend college without debt. Earning the GI Bill meant giving up years of their lives, serving in dangerous jobs and situations. The student loan debate is leaving out the impact cancellation will have on the veteran and active-duty community.
That’s probably why, in a recent Mission Roll Call poll of 6,202 veterans, 77% opposed student loan forgiveness.
College is expensive, and it’s only getting pricier. But since an undergraduate degree — even if unrelated to one’s subsequent career — has become a barrier to entry for most professional career tracks, most prospective students feel like they have no other option. They become saddled with student loans that don’t go away in bankruptcy and can delay important life events like buying a home or having children.Video
But there has always been a path to free higher education. For over 80 years, military service and the GI Bill have enabled millions of Americans to pursue college debt-free, or nearly free. Serve in the military, and the federal government will help ensure you have the resources necessary for success without burdensome debt.
For over 80 years, military service and the GI Bill have enabled millions of Americans to pursue college debt-free, or nearly free
Already in college? Join the ROTC. In the military and want to use the GI Bill for graduate school? Use tuition assistance. Not sure what you want to do out of high school? Enlist and earn your GI Bill. Already have a degree or want to make the military your career? Transfer the GI Bill to your kids.
I joined the Marine Corps two weeks out of high school, deployed to Afghanistan, and earned my degree using the GI Bill. I know firsthand the sacrifices service members made to earn that benefit. They all made a choice. In most cases, joining the military meant receiving the GI Bill and the chance to go to school for little to no cost. They earned that opportunity.
The U.S. military is an all-volunteer force; the active-duty component makes up less than 1% of the total civilian population. Every year, hundreds of thousands of Americans earn the GI Bill as an incentive for their service. It isn’t something freely given, and it isn’t something any civilian can feel entitled to.
For veterans and active troops who want to pursue a debt-free education through honorable service, policies that forgive student loan debt minimize their efforts and experiences.
Joining the military is not the only way to attend college, but it’s a vital option for service members who want a degree without having to saddle themselves with tens of thousands of dollars in debt. It was certainly the right of those who chose not to serve to find different options, but it should not be at the literal and figurative expense of those who served our nation.
Serving in uniform takes commitment and courage. And as our nation’s leaders discuss student loan forgiveness, we hope they adequately consider the life-changing decisions service members make for our country and honor their service in this debate.