On Wednesday, President Joe Biden announced that he will cancel federal student loan debt of $10,000 for each borrower who annually earns under $125,000. The “forgiveness” is superficially intended as relief for allegedly defrauded students and graduates struggling to make ends meet.
In reality, the move has more to do with politics than philanthropy.
Biden is desperate. Inflation is soaring, and Biden is owed a lot of blame for it. Gas prices are astronomical—Biden deserves still more blame. Midterm elections are less than three months away, and Republicans are well-positioned to sweep the House and the Senate—while many Democrat-controlled cities across the country are rife with violent crime.
What better way to obfuscate, and to distract the American people from cataclysmic failures, than to dangle “free” stuff? But canceling student loan debt will backfire on Biden for a number of reasons.
A recent CNBC poll found 59% of people are concerned that canceling student loan debt will exacerbate inflation. That number includes 81% of Republicans and 41% of Democrats.
Even former Obama administration Treasury Secretary and National Economic Council Director Larry Summers warned Biden that “student loan debt relief is spending that raises demand and increases inflation.”
Only 38% of young people support fully canceling student loan debt, which probably has something to do with it being so manifestly unfair. Responsible people who worked hard and struggled to pay off their debts are left in the dust, while people who didn’t pay their debts are rewarded. Worse still is the plight of the taxpayers now on the hook for this enormous bill who didn’t choose a traditional four-year-degree pathway to success.
Besides, canceling student loan debt is a misnomer. Nothing is “canceled.” Biden can’t “erase” student loan debt. He can just transfer it. Either taxpayers are forced to pay for it, or the government simply prints more money. The former is unfair, as it forces people who didn’t go to college to foot the bill for those who did; the latter dramatically increases inflation.
And here’s the real kicker: Wealthy folks carry the majority of the student loan debt in our nation. Biden’s move takes money from lower-income Americans to subsidize higher-income people. It the precise opposite of a “Robin Hood”-style “rob the rich to pay the poor” policy. A report from the Brookings Institution found that one-third of student loan debt is owed by the wealthiest 20%, while the bottom 20% carry only 8% of student loan debt. In other words, “canceling” student loan debt would effectively force the poor to subsidize bills for the wealthy.
The cost to the American taxpayer would be astronomical. If Biden only continued the moratorium on student loan payments through the end of 2022, it would cost taxpayers $20 billion. But if Biden outright cancels $10,000 per person of student debt, it could cost taxpayers roughly $300 billion.
Student loan debt is certainly a problem in our nation. It is self-destructive to suggest to young people that a traditional four-year-degree is the only path to success. Those higher education institutions offer leftist indoctrination and useless pieces of paper at an exorbitantly high price. We must do better for our children, and we can solve this problem without Biden’s redistributive ruse of “canceling” mass student debt.
To wit, not everyone needs to pursue a traditional four-year-degree. In fact, many shouldn’t. If college is the right fit, more young people could consider community college for the first two years before transferring to a four-year institution. Policymakers should also encourage and accredit more apprenticeship programs and partnerships.
More important, Congress must put an end to federally subsidized student loans. This would begin to solve the skyrocketing tuition problem at our colleges and universities, which are incentivized to raise tuition by reckless bureaucrats who continue to make more taxpayer money easily available without either consequence or oversight. The more student loans are backed by the federal government, the more colleges can hike tuition. Consider a Federal Reserve study that found a direct correlation: For every dollar of federally subsidized student loans received by colleges, schools hike tuition by $0.60. Taxpayers can no longer afford this high-aid, high-tuition model.
Biden is desperate to distract people from the pain his policies continue to inflict. Dangling “free stuff” like “canceling” student loan debt is a cheap way to try to buy votes. It won’t work.