Biden’s student loan bailout: Is it unfair?
President Biden’s student loan bailout is “terrible policy” driven by cynical political pandering, said Brian Riedl in The Dispatch. The estimated $300 billion giveaway announced last week forces millions of taxpayers who either didn’t attend college, or who struggled and sacrificed to pay off student loans, to bail out Democrats’ core constituency: “upwardly mobile college graduates.” Biden’s executive order forgives up to $10,000 in federal student debt for borrowers making less than $125,000 annually, or $250,000 per couple—“nearly quadruple the median family income.” Low-income recipients of Pell Grants can get up to $20,000 canceled. About 40 million Americans will benefit, but many of them are hardly the lowerincome people Democrats claim to represent. “Nearly half of all student loan debt is held by individuals with graduate degrees,” including doctors and lawyers and MBAs, “who borrowed as an investment in high future incomes.” Imagine all the “genuinely poor people” whose lives would be “transformed” if their credit card or medical debt or missed mortgage payments were forgiven, said Kevin Williamson in National Review. Biden reportedly worried that millions of Americans would hate bailing out the educated elite, but even though his unilateral “emergency” order may be ultimately found unconstitutional by the Supreme Court, he caved to “the great infantile cry” of the Democratic base.
As usual, the conservative argument against debt relief is “cultural resentment,” said Jamelle Bouie in The New York Times. GOP Rep. Jim Jordan asked why “a machinist in Ohio” should have to pay the debts of “a jobless philosophy major in Los Angeles.” But “the biggest beneficiaries of Biden’s policy” are struggling middleclass workers. Most of these debtors earn between $51,000 and $82,000 a year, and they are disproportionately young and Black. Besides, Jordan’s argument “could be raised against almost every government program in existence,” said Paul Waldman in The Washington Post. Taxpayer money “goes to all kinds of things that don’t benefit you directly,” including trillions in bailouts the U.S. handed over in recent decades to bankers, insurers, auto companies, and farmers. Taxes from “truck drivers and waitresses” also went toward forgiving Paycheck Protection Program (PPP) loans during the pandemic, including $183,000 for Rep. Marjorie Taylor Greene (R-Ga.) and $482,000 for Rep. Matt Gaetz (R-Fla). Where were conservatives’ shrieks about fairness then?
That comparison makes no sense, said Jeff Jacoby in The Boston Globe. PPP loans “were designed to be forgiven” so long as companies facing a “cataclysmic economic shutdown” kept paying their employees. PPP was “an expensive flop,” but at least it was a response to a real crisis. The student loan bailout, on the other hand, erases the deficit reductions that Democrats just passed and is “all but certain to make inflation worse.” You’d think there must be a strong economic reason for incentivizing Americans to get expensive degrees, said Alyssia Finley in The Wall Street Journal. There’s not. “The median earnings for a recent Columbia grad with an anthropology degree ($85,967 annual sticker price) was only $29,201.” Another analysis found that 41 percent of recent college grads “work at jobs that don’t require degrees.”
“Actually,” said economist Joseph Stiglitz in The Atlantic, “canceling student debt will cut inflation.” The estimated $300 billion price tag represents the estimated value of lost payments in all future years. The actual amount of reduced debt payments will probably be much lower, since many people drowning in student loans would never have been able to pay off their debts anyway. Inflation hawks “compound this error by assuming that the indebted students will take their forgiven debt and go on a spending spree.” That’s nonsensical. As part of the cancellation program, Biden plans to end the pandemic-era freeze on loan payments in January, bringing in an estimated $30 billion annually. So the net effect “will be to reduce inflation.” Meanwhile, relieving young people of crippling debt and interest payments will have positive economic effects, enabling them to get married, start families, move, and launch adult lives.
If Biden’s bailout withstands legal challenges, “what do Democrats do for an encore?” asked Megan McArdle in The Washington Post. Future graduates also saddled with debt “will badger Democratic politicians to help them out too.” The fundamental problem has not been addressed: the absurdly high cost of tuition, which has climbed to nearly $80,000 per year for many elite private colleges. When Congress raised caps on subsidized federal loans to students, “as much as 60 cents of every extra dollar lent got eaten up by tuition increases.” It’s a vicious cycle, and the Democrats’ fix “will likely make the problem worse.”