Emma Camp: Student Loan Forgiveness Is Bad News and Bad Policy

Assistant Editor Emma Camp unpacks how Biden's student loan forgiveness plan is deeply misguided.

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Emma Camp: Student Loan Forgiveness Is Bad News and Bad Policy

Just in time for the midterm elections, the Biden administration has announced that millions of college graduates don't have to pay back their student loans. 

This week, President Joe Biden announced a plan to cancel up to $10,000 in student debt for individual borrowers making less than $125,000 a year and two-income households making up to $250,000 a year. Pell Grant recipients would be eligible for up to $20,000 in debt cancellation.

This would completely eliminate student loan debt for millions. Yet, some progressives say it still doesn't go far enough and have pushed Biden to cancel up to $50,000 in debt for most borrowers. 

Even with an income cap, the vast majority of the benefits of Biden's loan cancellation program will accrue to borrowers in the top 60 percent of the income distribution. 

There are other problems too: The one-time plan would increase federal debt by at least $300 billion, and possibly more like $500 billion, effectively wiping out all the expected deficit reduction from the Inflation Reduction Act that Biden signed this month. 

Additionally, Biden does not have the legal authority to cancel student debt without congressional authorization. But don't take my word for it: That's what Democratic Speaker of the House Nancy Pelosi said last summer. In her exact words: "The president can't do it—so that's not even a discussion."

Yet, President Biden is doing it. 

That's the topic of this week's episode of The Reason Rundown With Peter Suderman, featuring Reason Assistant Editor Emma Camp.

Mentioned in this podcast:

"Biden's New Student Loan Forgiveness Plan Helps Mostly People Who Don't Need It," by Emma Camp

"The Biden Administration's Proposed Policy To Reduce Student Debt Is Only Going To Make the Problem Worse," by Emma Camp

"The Federal Student Loan Program Was Supposed To Pay for Itself. Now, It'll Cost Taxpayers $197 Billion," by Emma Camp

"COVID-19 Gutted College Attendance. Now, a Solid Labor Market Is Convincing More High School Grads To Skip It.," by Emma Camp

Audio production and editing by Ian Keyser; produced by Hunt Beaty.

Comments

[BigT]

The one-time plan would increase federal debt by at least $300 billion, and possibly more like $500 billion, effectively wiping out all the expected deficit reduction from the Inflation Reduction Act

An increase in inflation due to the IRA is not an ‘expected reduction.’ IRA is the worst legislation in a long time … since the American Rescue Plan Act of 2021.

[WilliamSanon]

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[Jerryskids]

Misguided? No, it's just evil. How many "misguided" policies is Biden entitled to pursue before you'll admit there's a possibility that he's doing it intentionally?

[OpenBordersLiberal-tarian]

If Biden proposes something that seems indefensible from a libertarian POV, just do what I do: change the subject to Bush or Trump.

#TemporarilyFillingInForButtplug

[BigT]

This plan gives the Heffalumps a great issue to attract more blue collar voters away from the Donkeys.

“Working hard? Paid off your student loans? The Dems just sent you a bill for the college tuition of their kids. About $2,000 per voter. If you vote for any Dem you are saying “Thank You, here’s your money!”

[Unicorn Abattoir]

Yes, but the GOP will find a way to fuck it up.

[Stuck in California]

They do seem uniquely capable of shooting themselves in the balls even when they have an obvious advantage.

[Unicorn Abattoir]

Even McConnell, who as far as I can tell, has no balls.

[Unicorn Abattoir]

Get a degree you can make a living with from a school you can afford and pay off your student loans like everyone else did. If you can't manage that, choose another path. And stop being a mooch.

LEARN THE LESSON OR BE THE LESSON.

There. I feel better now.

[Tankboy]

Student Loans. There are about 50 million people who owe this money. They pay on average $200-300 a month. They have not been making these payments for over two years. So that's $10-15 Billion every month that people get to spend on things other than loan repayment. That drive inflation. The loan forgiveness of $10,000 only reduces the total debt, most borrowers owe much more than that. The loan forgiveness is offset with a resumption in repayments, this reduces inflation.
I don't know how the President can reimburse the lenders the $500 Billion without a bill coming out of the House, but if a bill does go through Congress for the payment, can you see anyone in Congress voting against it? That's 50 million lost votes right there!

[liamjonh225]

Education loans. This debt is owed by nearly 50 million people. They spend typically $200 to $300 every month. These payments have not been made for more than two years. In other words, consumers get to spend $10 to $15 billion every month on things other than debt payments. which fuel inflation. Dental Billing Company

[liamjonh225]

The one-time approach would essentially cancel out all of the anticipated deficit reduction from the Inflation Reduction Act by raising government debt by at least $300 billion and possibly as much as $500 billion. A rise in inflation brought on by the IRA does not constitute a "anticipated reduction." Since the American Rescue Plan Act of 2021, the IRA is the worst piece of legislation that has been passed.Author: medical coding services

[sebfinui573]

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[Childhood reader of SCOTUS opinions, really]

again you miss the big picture. Sure the student loan thing is immoral and stupid and lazy. BUT it pales next to

FHFA "imposition of higher fees on homeowners (or buyers) with good credit scores and high down payments in order to allow lower fees for owners with riskier ratings and lower down payments."
SECOND : Fannie Mae and Freddie Mac will look only to the combined credit rating from two of the three major credit rating agencies rather than from all three"

A crash writ large way ahead of time

[Religion and Politics, my life]

Most people get lost if a causal chain has more than 2 links but Biden's stupid and lazy tuition BS is killing the housing market. Lenders, on the hope/bet, that tuition burdened home buyers will throw off debt that will allow them to afford the house are making very bad loans. And Biden's stupid move to lessen the value of credit scores adds to this.
Get the fool out of office.

[Peter Kreeft taught me LOGIC, BEWARE !!!!!!!]

This is Libertarian supposedly so let's get Hayekian

THe Libertarian CATO INSTITUTE long ago said

"many studies have found an inflationary effect, including one from the Federal Reserve Bank of New York that found that for every dollar increase in “subsidized” student loans colleges raised their prices 60 cents. Frankly, statistical research is not necessary to see this. One need only ask oneself, could colleges charge what they currently do, and have their current enrollment, without the aid that is nearly ubiquitous? Of course not."

[Peter Kreeft taught me LOGIC, BEWARE !!!!!!!]

“The availability of federal grants and loans to help students meet rising tuition costs virtually ensures that those costs will rise. A college which kept tuition affordable could forfeit millions of dollars annually in federal money available to cover costs over and above what students can afford, according to a financial aid formula. ”
― Thomas Sowell, Inside American Education