The Illogic of Student Loan Forgiveness

By JOONYOUNG HEO ‘25

US President Joe Biden announced this past August an extensive student debt relief plan. The proposal is set to cancel $10,000 of student debt for “low- to middle-income borrowers,” and $20,000 for recipients of the Pell Grant, a preexisting federal subsidy given to students who cannot otherwise pay for college. According to his administration, the plan will alleviate financial burden for tens of millions of American families. In a press conference in the White House, Biden explained that “all of this means people can start finally to climb out from under that mountain of debt.”

Already there are advantages of the plan to be seen. The obvious beneficiary, of course, is the fraction of the American population that has accumulated student debt. Despite what some of his critics have said, Biden’s student relief plan is far from a liberal hoax. By preliminary estimates, existing debt for nearly half of today’s borrowers will be eliminated.

One must not forget the Democratic Party itself, either; progressives, after years of calling for debt cancellation, have now won a momentous victory under the present administration. Many project, further, that the plan will go a long way to combat racial economic disparities. Naturally, this will reflect well on Biden, who will also have kept his campaign promise to “provide student debt relief.”

Unfortunately for Biden, however, these benefits exist only in the short term, or else are outweighed by countervailing interests. While the Department of Education estimates that his student relief plan will cost just under $400 billion, Marc Goldwein of the Committee for a Responsible Federal Budget (CRFB) finds that it could easily be as much as $600 billion. These are merely approximations, as the federal cost will be determined by the number of people who actually apply for relief, but they certainly tell us that all these benefits will come at a price––and perhaps one we cannot afford.

What’s more, these costs will drastically undermine the Inflation Reduction Act, a new policy under the Biden administration to reduce federal deficit by making prescription drugs cheaper and raising taxes on large corporations, among others. If anything, it will exacerbate the condition of the American economy by giving people more money to spend. The Economist had a point when it dubbed Biden’s plan “The Inflation Acceleration Action.”

Yet even behind the financial considerations lies an underlying flaw in student relief. In a statement shortly after the White House announced the plan in August, the Republican National Committee called it “Biden’s bailout for the wealthy.” The alliteration may be exaggerated, as with most other political denominations, but it’s not without reason.

Setting the politics aside, the stark reality is that the student relief plan would only benefit a portion of the American populace, and often families of higher socioeconomic status at that. According to the Federal Reserve, less than 25 percent of households have student debt, and it’s more common in the upper levels of the economy. Loans aren’t restricted to undergraduates, after all; many Americans borrow to undertake graduate degrees in law and business. These students aren’t exactly among the most needy. By bailing out the broad category of “people who are in student debt,” Biden’s administration is burning tax dollars to feed the prosperous.

To its credit, the plan does double the amount paid to recipients of the Pell Grant. But you don’t need a degree in mathematics to realize that they only account for a fraction of its beneficiaries. Whatever the White House does to sugarcoat this initiative, as The Washington Post put it, “white-collar professionals with high future salaries stand to benefit.” If the intent was to subsidize quality education for those in financial struggle, especially in light of the pandemic, the Biden administration has overshot by a few miles.

And what of the people who have worked day and night to repay a mountain of student debt, or the people who made extraordinary sacrifices to pay for their own education? Biden has cast them aside with the stroke of his pen, abruptly subverting an economic reality––that people must pay back what they have borrowed––on which Americans have based their financial expectations for years. For their prudence, the government will punish them by leveling the playing field for everyone.

The worst part is that Biden’s relief plan offers little more than cosmetic changes. At the end of the day, his administration will force the American people to bear these costs, and it will accomplish nothing. The impetus behind Biden’s relief plan can be traced back to the American narrative of college education itself. Since 1980, when college attendance for both men and women began to skyrocket, the notion that degrees guarantee future economic prosperity has become widespread. The distribution of federal subsidies to anyone in pursuit of a degree was the catalyst, directly encouraging the average American to follow their wildest dreams and earn a degree in anything from computer science to dance theory.

Today, in consequence, having a college degree is the bare minimum. A 2017 study at Harvard Business School attributed the dwindling value of higher education to “degree inflation.” To cross this threshold, American households have fallen into a pernicious habit of prioritizing college over the limits of their financial capabilities. And now the Biden administration will drain taxpayers of hundreds of billions to lighten an ever-increasing load.

In short, the accumulation of student debt is not an accident. It is rooted in modern American culture, and it will continue to be a national predicament as long as our mindset does not shift for the better. Biden’s relief plan will help some people, but at such an excessive cost, it’s a step in the wrong direction.

If it’s any comfort to the nation, many on the left wanted more. Leading Democrats exhorted the administration to cancel about $50,000 in debt with no limits on income. Under their proposal, it wouldn’t matter if the student’s parents earn ten thousand or two million in a year––the government would hand him the same amount. It is a testament to Biden’s political judgment, if anything, that he refused to cave in. But the nation needs more than a cosmetic cancellation of existing student loans. If the White House really wants to eliminate the financial burden of student debt, it must look elsewhere.