WaPo Editorial Board: Biden’s Student Loan Forgiveness Plan Will Provide A Windfall For Those Who Don’t Need It
[guest post by Dana]
The Washington Post editorial board weighs in on President Biden’s announcement:
Under progressive pressure to force grandiose policy changes, President Biden has generally embraced sensible reforms over flashy gimmicks. But his Wednesday student loan announcement did just the opposite.
The loan-forgiveness decision is even worse. Widely canceling student loan debt is regressive. It takes money from the broader tax base, mostly made up of workers who did not go to college, to subsidize the education debt of people with valuable degrees. Though Mr. Biden’s plan includes an income cap, the threshold does not reflect need or earnings potential, meaning white-collar professionals with high future salaries stand to benefit. Student loans, moreover, are a poor proxy for household income: An analysis by policy researcher Jason D. Delisle found that, in 2016, students from high-income and low-income families were just as likely to take on debt for their first year in an undergraduate program — and students from high-income families borrowed the largest amounts.
Mr. Biden’s plan is also expensive — and likely inflationary. The Committee for a Responsible Federal Budget estimates that extending the loan pause to the end of the year would cost $20 billion, while forgiving $10,000 for households making less than $300,000 would cost $230 billion. Together, these policies would nullify nearly a decade’s worth of deficit reduction from the Inflation Reduction Act. Moreover, it is unclear that the 1965 Higher Education Act even grants the president the legal authority to take such a sweeping step, given that it was historically understood to permit only more targeted relief.
Mr. Biden’s student loan decision will not do enough to help the most vulnerable Americans. It will, however, provide a windfall for those who don’t need it — with American taxpayers footing the bill.
Via Politico, I’m going to quote Democrats who have responded less than favorably to Biden’s questionable decision:
“Even some economists usually aligned with the White House, including former Clinton administration Treasury Secretary LARRY SUMMERS and former Obama administration economist JASON FURMAN, have criticized the cost of a potential student debt cancellation and warn that it could force future spending cuts or tax increases.”
Furman: “Pouring roughly half trillion dollars of gasoline on the inflationary fire that is already burning is reckless. Doing it while going well beyond one campaign promise ($10K of student loan relief) and breaking another (all proposals paid for) is even worse.”
Summers: “Every dollar spent on student loan relief is a dollar that could have gone to support those who don’t get the opportunity to go to college. … Student loan debt relief is spending that raises demand and increases inflation. … It will also tend to be inflationary by raising tuitions.”
Committee for a Responsible Federal Budget: “Debt cancellation would boost near-term inflation far more than the IRA will lower it.”
Sen. CATHERINE CORTEZ MASTO (D-Nev.): “I don’t agree with today’s executive action because it doesn’t address the root problems that make college unaffordable. We should be focusing on passing my legislation to expand Pell Grants for lower income students, target loan forgiveness to those in need, and actually make college more affordable for working families.”
Rep. JARED GOLDEN (D-Maine): “This decision by the president is out of touch with what the majority of the American people want from the White House, which is leadership to address the most immediate challenges the country is facing.”
Rep. CHRIS PAPPAS (D-N.H.): “[T]his announcement by President Biden is no way to make policy and sidesteps Congress and our oversight and fiscal responsibilities. Any plan to address student debt should go through the legislative process, and it should be more targeted and paid for so it doesn’t add to the deficit.”
Rep. SHARICE DAVIDS (D-Kan.): “It’s not how I would have addressed the issue.”
Rep. TIM RYAN (D-Ohio): “While there’s no doubt that a college education should be about opening opportunities, waiving debt for those already on a trajectory to financial security sends the wrong message to the millions of Ohioans without a degree working just as hard to make ends meet.”
Sen. MICHAEL BENNET (D-Colo.): “In my view, the administration should have further targeted the relief, and proposed a way to pay for this plan. While immediate relief to families is important, one-time debt cancellation does not solve the underlying problem.”