Student-Loan Forgiveness Shifts Burden to the Working Class
In mid-February, new weekly unemployment claims rose to 861,000, a four-week high; so the last thing the country needs is an additional tax burden on working families. Yet President Biden announced on Tuesday that he’d use his executive power to forgive billions of dollars’ worth of federal student-loan debt. Biden says that he’s “prepared to write off” $10,000 of individual debt for those with outstanding federal student loans.
If the administration gets its wish, low-income Americans will be stuck paying for the educations of the better off. This isn’t fair to those who work their way through college or pay their loans down afterward. It’s also unfair to parents who pay tuition outright after years of hard work and planning.
Education policy should encourage responsible behavior. The administration’s proposed loan forgiveness would punish people who work hard to meet their financial obligations, hurt working-class Americans who don’t go to college but whose jobs are essential, and enable colleges and universities to hike already-inflated tuitions.
Politicians who insist on forgiving student loans should be prepared to answer to the millions of Americans over the last half-century that paid for their college educations or worked overtime to give their children the gift of a debt-free future upon graduation.
They should have to answer to people who spent years dutifully making payments until their debts were settled and others, like a father from Iowa, who said he worked a double shift for more than a decade so that he could pay for his daughter’s college education.
During a campaign event last year, this father questioned Sen. Elizabeth Warren (D-Mass.) about her sweeping student-loan forgiveness plan. She told the dad that “of course” he shouldn’t expect to be reimbursed for his overtime. Hard work, he responded, doesn’t pay.
He’s right – in fact, hard work is punished under Biden’s proposal. And while ever-increasing costs are making some question college’s return on investment, college graduates still make significantly more money than their non-college-educated peers.
College graduates, on average, earn $30,000 more a year than those with high school diplomas, according to research from the Federal Reserve Bank of New York. Yet Democrats want working-class taxpayers to assume loans that they never co-signed.
As Jason Furman, Harvard professor and former economic adviser to President Obama, recently said, forgiving student debt is “arbitrary” and “regressive” policy, meaning that it would take more money from low-income earners compared to affluent earners.
Moreover, he says that erasing nearly $1 trillion in student-loan debt would make a minimal impact on the economy, an argument that runs counter to Democrats’ claims that student-loan forgiveness would help stimulate the economy.
Sens. Chuck Schumer (D-N.Y.) and Warren both want to see more aggressive student-loan forgiveness, as does Rep. Alexandria Ocasio-Cortez. Sens. Schumer and Warren in February introduced a resolution calling on the president to cancel up to $50,000 in federal student loans per borrower. President Biden has since come out against the resolution but will inevitably face more pressure down the road.
The president should remain steadfast in his opposition to increased student-loan relief, as it would shift the tax burden onto lower earners. It’s simply bad policy to saddle Americans who have paid off their student loans with the debt of their affluent peers.
The president deserves credit for not pursuing a more radical approach to student-loan forgiveness. But he should reconsider his commitment to forgive even $10,000 per student-loan borrower, as doing so would still hurt the nation’s poorest households.