“President Joe Biden announced Wednesday that he will cancel $10,000 in federal student loans for millions of borrowers… Borrowers who earn less than $125,000 a year, or $250,000 for couples who file taxes jointly, will be eligible for debt cancellation. Pell Grant recipients, who make up the majority of student loan borrowers, will be eligible for an additional $10,000 in debt relief, for a total of $20,000.” NBC News
The left supports the plan, arguing that it is necessary to help graduates in debt, but calls for permanent reforms.
The policy “will pour ‘roughly half [a] trillion dollars of gasoline on the inflationary fire that is already burning,’ says Jason Furman, formerly the top economic adviser to President Barack Obama. And with the income caps set so high, it remains an extremely regressive policy, heaping benefits on the most affluent demographics, while leaving everyone else to pay the cost through some combination of higher taxes, lower benefits, or higher inflation and interest rates…
“One study suggests that when Congress raised the caps on subsidized federal loans, as much as 60 cents of every extra dollar lent got eaten up by tuition increases. Which in turn ballooned loan balances, and in turn created political pressure to make student loan programs more generous to borrowers — as the government has over the years, undoubtedly putting further upward pressure on tuition. Trying to fix these problems by making it even more attractive to borrow money is like trying to quit smoking by switching to unfiltered cigarettes.”
Megan McArdle, Washington Post
“According to a recent analysis from the Penn Wharton Budget model, under Biden's debt forgiveness plan ‘about 70 percent of debt relief accrues to borrowers in the top 60 percent of the income distribution.’… Student debt forgiveness isn't the noble, equalizing project that its supporters claim it is. It's the personal project of some of our nation's most affluent and educated individuals. The college educations they benefited from will now be paid for by people who make less money than them and have less power.”
Emma Camp, Reason