WASHINGTON, DC, May 2 – Political commentator Kristin Tate did her homework and recently published a pithy Opinion article that gets right to the point on The Hill’s online news website. Her topic: student debt forgiveness. She wrote, “The Democrats are hellbent to transfer money to a section of their voting base: Relatively young liberal arts college graduates, many of whom belong to the upper and middle classes. The numerous student loan pauses, as well as demands to fully forgive student loans, have little to do with the pandemic and everything to do with a political goal ahead of the 2022 midterms.”
Tate notes that the generous Biden student pauses have already cost taxpayers tens of billions of dollars, and on top of that, it’s been estimated that forgiveness could cost as much as $2 trillion. Yet, President Biden is saying that he may go ahead and write off as much as $10,000 per student borrower without Congressional approval using his executive authority. The beneficiaries of his largess would be overwhelmingly borrowers between the ages of 20 and 50. These are mainly people who have gone to college to learn the skills needed to snag good-paying jobs and, thus, are presumably, for the most part, financially able to pay their debts in full.
The American Institute for Economic Research [AIER] did the math and concluded, “Nearly two-thirds of Americans do not go to college. They don’t have any student loan debt to forgive. Of those who do go to college, around thirty-five percent graduate without any student loan debt; and some of those who graduated with student loan debt have since paid it off. So, from the start, we are talking about a policy that will only help around one in five Americans. Roughly 80 percent of Americans will not receive any benefit from a student loan debt forgiveness program.”
As for the notion that citizens who lost their jobs due to the pandemic need relief, the AIER report points out that it may be the case for workers without a college education, but those with a degree have likely been working remotely. According to the report, “most of those with student loan debt also have college degrees. On average, they have been earning about 80 percent more than those who do not have degrees. And those with the most debt—doctors, dentists, pharmacists—have typically realized even higher incomes.” In addition, “these folks generally have more money in the bank and, therefore, tend to be better positioned to weather the storm if they have lost their job or have otherwise experienced a reduction in income due to COVID-19.”
It often gets lost in the discussion that the biggest loser, should student loans be forgiven, is the American taxpayer. The financiers at Nerdwallet say that the U.S. Department of Education owns a whopping 92% of student loans, and currently, there are about 43.4 million federal student loan borrowers with an outstanding debt balance of $1.61 trillion.
Meanwhile, Sandy Baum at the Center on Education Data and Donald Marron at the Urban-Brookings Tax Policy Center, in an explanation published on the Urban Institute website, tells us, “Cancelling student debts will immediately increase the federal deficit; how much depends on the value of the forgiven loans…Suppose the government made a $100 student loan in January and estimated it would bring in a net surplus of $3 over its life. If nothing had changed since January, canceling that debt would increase the deficit by $103. The government would lose the $100 face value of the loan plus the $3 surplus it expected.”
Founding Father Benjamin Franklin is well known for his pithy sayings, including one that might apply to the President Biden and his forgiveness scheme: “The second vice is lying, the first is running in debt.”
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