Biden’s Student-Loan Cancellation is a Fiasco. Regressive and probably unconstitutional, the president's order will solve nothing.

James G. Martin Center for Academic Renewal ^ | August 25, 2022 | Jenna A. Robinson and George Leef

[karpov]

Yesterday morning, President Joe Biden revealed his administration’s plan to forgive billions of dollars in student loans. According to a White House Fact Sheet, the plan will forgive up to $20,000 in federally held debt for students who received Pell Grants and up to $10,000 for students who did not. Forgiveness applies to individuals earning less than $125,000, with an income ceiling of $250,000 for married couples. Additionally, the Covid-era pause on student-loan payments will be extended until December 31, 2022. The plan also allows borrowers with undergraduate loans to cap repayment at just five percent of monthly income.

Critics on both sides of the aisle have already panned the plan for its many critical problems, including:

1. It’s regressive. Biden’s debt cancellation plan includes borrowers with household incomes of up to $250,000, an amount that puts such couples in the top 10 percent of income earners nationwide. A Penn Wharton budget model estimates that “between 69 and 73 percent of the debt forgiven accrues to households in the top 60 percent of the income distribution.”

2. It penalizes the 286 million Americans with no outstanding student-loan debt, including many who never attended college. Dr. Beth Akers of the American Enterprise Institute tweeted yesterday, “Only about 1 in 5 Americans hold student loans. The other 4 will be on the hook to pay their share of the hundreds of billions we will spend on Biden’s loan cancellation plan … but will see no benefit.”

Also excluded are the millions of borrowers who refinanced their student loans through private lenders and those who borrowed from sources other than the federal government.

3. It’s costly.

[Liz]

TOTAL FLOP.