B.ack in November we have explained that canceling student debt would be a bad policy choice, and that by order of the executive branch would be an abuse of the discretion that Congress has given the president.
The good news is that President Biden has been scaled back the ambitions of the left on both fronts. Where some have asked for $ 50,000 in debt cancellation, Biden appears to be more comfortable with $ 10,000, which may allow higher amounts in special circumstances. Biden was also skeptical of his ability to make this change unilaterally and is asking 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 outlined earlier.
Student debt is not a “crisis”; most students graduate with manageable indebtedness, and those who are extremely indebted are usually the people who have completed a postgraduate degree or have chosen to attend expensive private schools. In addition, if a person is highly indebted and has a low income, under current legislation he can already choose an “income-based” repayment option that cancels the debt after making payable payments for a period of time. There are certainly sympathetic instances where students were sucked in by fraudulent college claims, or where students went to school but didn’t graduate, leaving them some guilt without a degree – but general forgiveness, even limited to $ 10,000, is not aimed at such cases, much less prevent them from continuing.
Instead, forgiveness helps the educated classes at the expense of the taxpayer in general. Like Adam Looney at Brookings Institute recently explainedEven $ 10,000 in debt forgiveness would involve a transfer roughly the size of the country spent on welfare (TANF) since 2000 and higher than the amount spent since then feeding hungry schoolchildren in schools with a high lunch program. ”The median income of student loan households is $ 76,400, and only 7 percent are below the poverty line, he added.
Furthermore, forgiveness of debt is an insult to those who have paid off their loans early. It’s a bad way to stimulate the economy in the short term, because so much of the debt forgiven wouldn’t have been paid for years anyway. It sends a signal that educated young adults should not be responsible for their own finances. And it tells colleges, which don’t control their own costs, that taxpayers will always step in to pick up the bill.
The idea Biden is swinging into – $ 10,000 in forgiveness passed by Congress – isn’t as bad as the $ 50,000 through an executive order that other Democrats want. But that’s not it good, one of both.
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