My Op-Ed ran this morning in the Moscow-Pullman Daily News. If you never had college debt, now you do. Thanks, Biden.
Congratulations to everyone who didn’t have college debt. Now you do.
Last week, President Biden unveiled a sweeping plan to “forgive” billions of dollars in student loan debt. It’s the biggest move ever seen by the federal government concerning debt forgiveness. I put “forgive” in scare quotes because the student debt will not simply disappear. The debt will be transferred to those that don’t owe it: taxpayers.
45 million Americans owe more than a combined $1.7 trillion in student debt. The average federal student loan debt is $38k. Student debt is more than either auto loan or credit card debt. Biden’s plan is that families earning less than $250k/yr will each have $20k of Pell Grant loans eliminated (which are most loan recipients), and $10k of other federal student loan debt cancelled. The plan will cover most Americans currently with student loans.
Biden also extended the freeze on student loan payments (loan forbearance) from 31 August until the end of the year. To date, $72 billion in taxpayer relief has been provided on student loan interest. Taxpayers pay that interest. Biden also proposed an Income-Driven Repayment (IDR) plan, capping monthly payments to 5% of the borrower’s discretionary income. Again, the interest is paid by taxpayers.
The Penn Wharton Budget Model (PWBM) is considered the gold standard in economic modeling tools for predicting policy impacts on the national budget. The PWBM estimates Biden’s proposed plan (debt cancellation, loan forbearance, and IDR) will exceed $1 trillion.
I have many objections about unloading personal student loan debt onto taxpayers. First, this is unconstitutional. As Nancy Pelosi said last year, the president cannot cancel student loans unilaterally without an Act of Congress.
Second, why does a family earning $250k/yr need a taxpayer bailout? 73% of that debt accrues to households in the top 60% of the income distribution. This is a wealth redistribution from the bottom to the top.
And closer to home, those who chose not to go into debt for college are now paying for those who did. Many chose an in-state public college over a preferred out-of-state college, or chose to live at home to save money on room and board. 24% of adults have already paid off their student debt, many at the cost of their parents scrimping and saving and working second or third jobs to afford their kids’ education.
Worse than that, those who did not attend college are forced to pay for those who did. Why should trade school graduates pay for Gender Studies degrees? Why should the blue-collar taxpayers be penalized for someone choosing a degree that ultimately costs more than it earns?
Not to mention the terrible timing. The US does not need an additional trillion dollars in federal debt to wipe out the alleged savings over the next decade from the Democrats’ Inflation Reduction Act (or, more appropriately, the Income Reduction Act), on top of our 8.5% inflation rate, national debt of $30.7 trillion, and additional unfunded liabilities of $171 trillion.
The fact that a big forgiveness act by Biden is happening just a few months before midterm elections is not lost on anyone, similar to Trump putting his name on the 2020 stimi-checks. But apparently inflation has caught up with the Democrats’ vote-buying attempts. It costs them $20k instead of Trump’s $600.
The complications from student debt forgiveness go together with inflation. The cost of higher education skyrocketed from 2002-2022, at 4.6 times the rate of inflation during the last 50 years, and eight times faster than wages have risen.
This is really a bailout for colleges that continue to offer overpriced education programs without giving students the actual skills they need for productive careers. How will we not get stuck in this same situation in a few years? Look at the economists’ “you get more of what you subsidize” argument.
My hero, Thomas Sowell, sums it up best: “We seem to be getting closer and closer to a situation where nobody is responsible for what they did but we are all responsible for what somebody else did.” This attempt to undo the government’s overreach into education will only worsen inflation, and of course bail out the wealthy at the expense of the working class.