Senator Chuck Schumer and Elizabeth Warren have urged President Joe Biden’s administration to cut huge sums of federal student debt, the equivalent of almost all student debt, as the federal government – that is, taxpayers – is by far the largest provider of student loans. Schumer and Warren sponsored a resolution calling for loan termination of up to $ 50,000 on an indefinite number of state student borrowers, though Schumer also mentioned that eligibility would be capped on income of $ 125,000, which would only exclude about the top 10% of earners.
That would be a terrible policy on many levels.
First, it would be obviously unfair. Getting in debt can be difficult, but why should someone take your money and take advantage of it and not at least make you healthy again?
And yes, borrowers usually benefit. The average bachelor’s degree holder makes about $ 1 million more over their lifetime than the average person whose education ends with a high school degree. Go beyond a bachelor’s degree – which is what many student loans are for – and the payout is even bigger as someone with a professional degree, e.g. B. in law or medicine, made about $ 2.3 million more over the course of his life. Meanwhile, the average federal student’s debt is around $ 36,500, according to the federal government. Substantial but small compared to the payout.
Borrowers are also usually people who have gotten off to a good start in life. The vast majority of student debt – 63% in 2016 – is held by people in the upper half of the income distribution. The richest 25% of Americans hold 34% of the debt.
The numbers make it clear that massive student loan cancellation would largely help the wealthy. But wouldn’t that be an economic incentive that is especially valuable in these economic times of COVID-19?
The Schumer-Warren resolution touts it as such, but ignores one major problem: the Feds have budgeted on the basis of loan repayment. If this is not the case, someone else will have to make up for the lost federal income. While a cancellation would earn the average borrower about an additional $ 250 each month, someone else would have to cut their own expenses or investments to send more money to Washington.
So long, suggestion.
In the meantime, people with college degrees are not the people hardest hit by COVID-19 and its economic impact. It is people without her who work in jobs that cannot be done in the remote convenience and security of a basement. The restaurant worker needs more help than the accountant or lawyer. And of course, the only thing that will end the COVID-19 economic slowdown is the end of COVID-19 itself.
Mass cancellations would also harm university politics.
America’s ivory tower is an overused building, and waiving student debts, far from solving rampant tuition inflation or the spread of water parks on campus, would only compound such problems. By taking money from taxpayers and giving it to students, the state tuition grant has enabled colleges to charge higher prices and has often encouraged students to charge more expensive items that require such prices. A bulk cancellation would signal the students to borrow even more – since they don’t actually have to pay it back.
After all, it is about the dictation of the president. There is an interesting debate about whether the laws in force allow an administration to declare almost all student debt forgiven.
But even if this were technically legal, it would be an affront to democracy, in which the people represented in Congress should decide on such serious issues whether $ 1.6 trillion – that’s with a “t” – in taxpayers’ money should be permanent handed over to borrowers.
Paying back debt can be difficult, but it is the right thing to do. If a president simply states that for-profit graduates can keep what is borrowed, it would be the opposite of that.
Neal McCluskey is the director of the Center for Educational Freedom at the Cato Institute (cato.org), a libertarian think tank based in Washington, DC
source https://collegeeducationnewsllc.com/pro-con-canceling-student-loan-debt-by-presidential-decree-wrong-on-so-many-levels/
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