Democrats are pushing for Joe Biden to make one of his first acts as president the cancellation of trillions of dollars in student debt, a policy that would hand billions to the nation’s wealthiest with little benefit to the overall economy, experts say.
In an Election Day interview, Senate minority leader Chuck Schumer (D., N.Y.) called on Biden to enact a plan, authored by himself and Sen. Elizabeth Warren (D., Mass.), to drop up to $50,000 in borrowers’ student loan debt by executive order. This week, Warren and a bevy of congressional progressives have renewed the push; on Tuesday, Biden said that he’d like to see up to $10,000 forgiven but that Congress should take the lead.
The enthusiasm among left-leaning Democrats mirrors support among the party’s base, which in the Trump era has drawn in more and more college-educated Americans. Advocates also argue that debt relief, which would run to over $1 trillion, would be a major stimulus for a nation still stuck in the coronavirus recession.
But education experts told the Washington Free Beacon that forgiveness would “enrich the already privileged in this country while leaving behind, or perhaps even draining from, the neediest.” New research agrees, having shown that forgiveness would bring little economic relief to anyone but the most educated.
Warren and Schumer’s proposal calls on Biden to exercise his authority under the 1965 Higher Education Act and cancel up to $50,000 dollars of student-loan debt per borrower. That would trim roughly $1 trillion off of the $1.5 trillion in outstanding federally owned student debt, according to Preston Cooper, an education fellow at the right-leaning Foundation for Research on Equal Opportunity.
“I understand that it’s a pandemic and there’s a case for generous economic relief spending,” Cooper said. “But I question whether student debt forgiveness is really the best use of the money.”
That’s because student-debt holders are on average well-off: More than half of debt is held by the top 40 percent of wage earners. Among Americans ages 25 to 40, half of debt is held by the top 40 percent of asset holders—meaning that the wealthiest young adults also have the most debt.
Having a degree can add over a million dollars to a person’s lifetime earnings, swamping the costs of bearing debt. In other words, the Manhattan Institute’s Beth Akers told the Free Beacon, debt cancellation would amount to a major transfer from the poor to the rich.