We recently looked at Joe Biden’s anticipated executive order that would “forgive” a portion of the debt that certain individuals carrying student loans are responsible for. Biden still appears to be prepared to do something along these lines, but he’s reportedly attempting to walk a line between the demands of socialist Democrats who want all student debt wiped out and his advisors, some of whom are frantically trying to point out how horrible the political optics of this plan are. In finding a compromise, the President is reportedly considering canceling a smaller amount of debt and putting an income cap on who would qualify. The lowest end of that range would allow debt cancellation for borrowers who “only” earn $125,000 per year or less. But as a New York Post editorial board article points out this week, the $125K cap is still “a joke.” A massive amount of money would be flushed away to benefit a huge number of former students, most of whom will go to earn vastly more money in their careers than middle-class workers do.
For starters, that $125K income cap is 10 times the national poverty line, and many just-out-of-college workers with student loans will easily fall under it (the average entry-level salary for college grads is less than $60,000, per the National Association of Colleges and Employers).
And many of these grads will do very well indeed — as doctors, lawyers or CEOs — later in life, but yet still wouldn’t have to repay their forgiven debt. Indeed, white-collar workers with advanced degrees account for nearly half the $1.6 trillion in outstanding federal student debt.
The Committee for a Responsible Federal Budget calculates that the “limited” Biden plan still costs the taxpayers at least $230 billion, with two-thirds of the benefit going to Americans in the top half of incomes. Oh, and: “It would also worsen inflation and increase the cost of higher education.”
Even with a Master’s Degree, most graduates won’t break that salary cap for quite a few years unless they land in some of the most prestigious positions in the country straight out of school. And they will go on to rake in far more than nearly everyone with a high school or technical school degree. And the taxpayers will still be on the hook for nearly a quarter of a trillion dollars.
This “limited” solution still has all of the same issues that the more expansive proposals under consideration have. It does nothing for all of the other borrowers who took on different sorts of debt, including a huge number of people who will probably never earn $125K per year. This isn’t to say that they should have their debts forgiven, but what makes student loan debt so special?
This is also still a one-time handout that doesn’t address the underlying problem of a student loan and college tuition system that is totally broken. In other words, a select group of people would see some relief right now, but that’s it. If you were foolish enough to do without and you already paid off your loans, you are, as the Post editorial board puts it, “a sucker.” If you’re just entering college now and need to take out loans, there will no relief for you unless the government keeps pushing through these “forgiveness” packages over and over again. (Let’s not give them any ideas.)
It remains a mystery why this one subset of borrowers gets so much sympathy and attention while others do not. What about the people who ran up exorbitant amounts of debt on their credit cards at high-interest rates? What would the public think about Joe Biden waving a magic wand and making all of that debt somehow disappear? More to the point, what would Biden say to all of the people who either managed their credit card debt wisely or worked their tails off to pay those cards down once the crisis that generated the debt had passed? I guess they’re all suckers too, right?
Even with income limits on the forgiveness, this remains nothing but a very expensive sop to the people most likely to vote for Democrats. That would be younger people with college educations who will be among the higher earners (and likely higher Democratic donors) in the country. And everyone else will foot the bill for it.