Joe Biden revealed his plan to cancel $10,000 of student loan debt per borrower earning under $125,000 on Wednesday. The forgiveness would include up to $20,000 if students used Pell Grants to pay for their education. He also extended the federal loan payment pause until January 2023.
Progressive Democrats were behind canceling $50,000 per borrower. Still, the president noted on social media that the $10,000 of student debt forgiveness was in keeping with his campaign promise to “give working- and middle-class families breathing room.”
America’s middle class and working families need more breathing room.
That’s why nearly 90% of the relief provided through my Administration’s action on student loan debt relief will go to folks making less than $75,000 a year. pic.twitter.com/pNBPyhnCla
— President Biden (@POTUS) August 25, 2022
A nonpartisan analysis from the University of Pennsylvania Wharton School revealed the cancelation of $10,000 per borrower would cost $298 billion in 2022 and $329 billion by 2031 should the policy be renewed year-by-year. In addition, the report shows that less than 32% of the funding would benefit those in the two lowest income groups, and 42% would benefit those earning more than $82,400 annually.
The Brookings Institute reported that the wealthiest 20% of households owe one-third of student debt. In comparison, only 8% is owned by the bottom 20% — partly because more degrees are often necessary for the highest-paying professions.
According to the Cato Institute education policy analyst Colleen Hroncich, “When government gives people money to attend college, there will be more demand for college. And when more workers have college degrees, employers start looking for workers with degrees even for positions that historically did not require one.”
A top economist who worked for the Obama Administration slammed Biden’s decision to wipe out billions in student debt.
Jason Furman, President Barack Obama’s chairman of the Council of Economic Advisers, responded to the plan by writing on social media, “Pouring roughly half trillion dollars of gasoline on the inflationary fire that is already burning is reckless.”
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.
— Jason Furman (@jasonfurman) August 24, 2022
“Doing it while going well beyond one campaign promise ($10K of student loan relief) and breaking another (all proposals paid for) is even worse,” he continued. “There are a number of other highly problematic impacts including encouraging higher tuition in the future, encouraging more borrowing, creating expectations of future debt forgiveness, and more.”
The White House fact sheet has sympathetic examples about a construction worker making $38K and a married nurse making $77,000 a year.
But then why design a policy that would provide up to $40,000 to a married couple making $249,000? Why include law and business school students? pic.twitter.com/463YMmCT9g
— Jason Furman (@jasonfurman) August 24, 2022
BTW, those examples also contradict the baseline some have concocted to claim that this won't raise inflation. The claim it won't raise inflation is based on the construction worker going from permanently paying $0 interest to paying $31 a month at an annual cost of $372.
— Jason Furman (@jasonfurman) August 24, 2022
