Back in november, we Explain that canceling student debt would be a bad policy choice and that doing so by executive order would be an abuse of the discretionary power that Congress has given to the president.
The good news is that President Biden reduced the ambitions of the left on both fronts. Where some have asked for a $ 50,000 debt write-off, Biden seems more comfortable with $ 10,000, perhaps allowing higher amounts in specific circumstances. Biden has also been skeptical of his ability to make this change unilaterally and is calling on the Justice Department to review the law.
The bad news is that even $ 10,000 in general forgiveness is a bad idea, for the same reasons we discussed earlier.
Student debt is not a “crisis”; most students graduate with manageable levels of debt, and those with extremely high debt tend to be the ones who have completed postgraduate degrees or have chosen to attend expensive private schools. Additionally, if someone has high debt and low income, they can already under current law choose an “income-based” repayment option that cancels the debt after making affordable payments for a period of time. period. There are certainly some nice cases where students have been duped by fraudulent college claims, or where students have attended school but did not graduate, going into debt without a degree – but the general discount, even limited to $ 10,000, does not target such cases, much less prevent them from continuing.
Instead, forgiveness helps the upper classes with a college education at the expense of taxpayers in general. As Adam Looney of the Brookings Institute recently explained, “Even a $ 10,000 debt forgiveness would imply about as large a transfer as the country has spent on social assistance (TANF) since 2000 and exceeds the amount spent since then to feed starving schoolchildren in very high schools. poor through the school breakfast and lunch program. The median income of households receiving student loans is $ 76,400, and only 7% are below the poverty line, he added.
Plus, debt forgiveness is an insult to those who paid off their loans early. This is a bad way to stimulate the economy in the short term, as a lot of the canceled debt would not have been paid off for years anyway. This sends the message that educated young adults shouldn’t be responsible for their own finances. And it signals to colleges, which fail to control their own costs, that taxpayers will always step in to foot the bill.
The idea that Biden is heading for – $ 10,000 in pardon passed by Congress – isn’t as bad as the $ 50,000 by executive order other Democrats want. But it’s not Well, That is.