Student loan forgiveness is just another form of wealth…

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The Biden administration recently announcement yet another extension of the pause on student loan repayments, which is costing the government $4 billion a month. Yet many Democrats are to respond increasing pressure President Joe Biden to cancel all student loans, hoping to bolster Democratic chances in the midterm elections by sending massive checks to college graduates. Biden should continue to resist sweeping calls to cancel student loans, a costly policy that disproportionately benefits the wealthiest Americans without solving the long-term problem.

Some supporters of debt cancellation have even begun to use the Biblical language of the “Jubilee” (celebrated every 50 years among the Israelites) to advocate for executive action. the Jubilee 100
is a group of “debt strikers” who pledged last year to stop paying their federal student loans until Biden cancels all debt. (It’s been easy so far, given that the Biden administration continues extend the COVID pause on student loan repayments for everyone.)

But the Jubilee Year mentioned in the Old Testament does not represent a societal redistribution of wealth or forgiveness of debt as we define it today. “There is therefore a significant consensus among biblical scholars that the Jubilee actually involved the full payment of a debt, not its forgiveness,” concludes Art Lindsey at the Institute for Faith, Work and Economics. Although the Bible also includes a parable of voluntary forgiveness of debt between two people as an act of mercy, this hardly translates to obligatory government forgiveness as an act of social justice.

After all, the Bible also encourages us to care for the poor, and forgiving any student debt does the opposite. The data show that student debt is more concentrated among wealthy, white households with significant lifetime earning potential. The richest 40% of households earn three-quarters of student loan repaymentswhile the lowest 40% of households make only 10% of the payments.

Most debt is also held by people who have obtained a bachelor’s degree and therefore have significantly higher lifetime incomes than those without a degree, and 80% of people in debt already say they are “doing well financially”. Half of Harvard Business School MBA graduates, for example, left school in 2020 with a Medium $90,000 in debt. But their average annual compensation after graduation is $215,000. Do they really need debt forgiveness?

President Biden should focus on bolstering existing income-based repayment plans that already help low-income borrowers cap (or eliminate) their payments.

Developing a targeted forgiveness solution for those who really need it doesn’t seem like a priority for debt forgiveness proponents, who just want the president to decide unilaterally. erase all student debt without congressional approval (that he actually has that power is legally questionable). Those revenues will eventually have to come from somewhere, and the vast majority of Americans who would not benefit from debt cancellation will eventually face significantly higher taxes or cuts to other government programs.

Additionally, canceling all student debt could cost up to $1.6 trillion, immediately making it the government’s most expensive social spending program, according to a 2021 study. report by Adam Looney at the Brookings Institution. Canceling all debt would cost more than the country has spent on food stamps in the past 20 years, and “even $10,000 of debt cancellation would imply a transfer about as large as what the country spent on welfare”. [Temporary Assistance for Needy Families] since 2000,” says Looney.

Canceling student debt is a costly and ineffective way to reduce poverty and stimulate the economy. It’s also unfair to about a third of college graduates under 40 who have taken on debt and worked hard to pay it off completely, not to mention the majority of Americans who have never attended college and who would have to to subsidize those who have done so.

Debt forgiveness also ignores a key question: what is the long-term solution to higher education affordability? If we cancel all student debt today, but make no changes to the program, the federal government will continue to lend over $1 trillion over the next decade. (That number could rise dramatically as new students respond to the policy by attending expensive colleges, borrowing the maximum amount, and then demanding another round of forgiveness.) Unless something else changes, the colleges will continue to benefit the most increase their taxpayer-subsidized tuition.

Instead, President Biden should focus on strengthen existing income-based repayment plans that are already helping low-income borrowers cap (or eliminate) their payments. It could also explore tighter caps on the amount of federal loans given, based on the earning potential of different universities and degrees, to ensure students don’t take too much risk. Canceling student debt is a political tactic to win over young voters with high lifetime incomes, but solving this problem requires more serious policy and an end to federal incentives to keep borrowing money.

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