- Larger Benefit If You Make More Money...
- Doesn't Target Those Who Need Assistance.
- Burdens Low-Income Americans.
- Rewards Fiscal Irresponsibility.
- Is Inequitable.
- Doesn't Fix The Problem
- How To Fix The Problem
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Larger Benefit If You Make More Money...
- The top 25% of households with the highest earnings held 34% of all education debt.
- The top 10% of households, with incomes of $173,000 or higher, held 11% of the debt.
- Households in the lowest income quartile (household incomes of $27,000 or less) hold only 12% of outstanding education debt.
Education Debt Held by Households Age 25 and Older in Each Income Quartile, 2016
Student debt is disproportionately concentrated among the well off. Those who earn more owe more.
Sources: Urban Institute
Doesn't Target Those Who Need Assistance.
- The concentration of education debt among the relatively affluent means that forgiving student debt is regressive. The policies benefit the rich, not the poor.
- Those best equipped to pay off their loans will benefit the most from a student loan bailout.
- Targeting the households who are struggling the most financially requires looking beyond who owes the most.
- People who never attended college have been impacted the most by the Covid-19 pandemic and the recession. Those with only a high school degree have an unemployment rate of 8.1%, while people with a college degree have a jobless rate of 4.2%.
Share of Borrowers and Share of Total Outstanding Debt by Education Level, 2016
Burdens Low-Income Americans.
Two-thirds of Americans do not hold bachelor’s degrees. Many have a desire to avoid the high cost of higher education. These Americans will earn about $1 million less over their lifetime than someone with a higher education degree.
If the federal government forgives student debt, the tax-payers will feel the burden, most of which never even attended college and earn significantly less than those who did.
Those with college degrees have a better shot at finding higher-paying employment than someone with only a high school diploma. If we’re going to help someone with our tax dollars, shouldn’t it be the people who need it the most?
Rewards Fiscal Irresponsibility.
If loan forgiveness becomes universal, students who made those smart financial decisions, ensuring they make their loan payments on time, will be given the same benefit as students who went to the most expensive university and have defaulted on their loan payments every month.
Why would any student going forward decide to go the responsible route? Why work knowing taxpayers will pick up the tab?
Not to mention the millions of members of our military who receive tuition-free college as a benefit earned for serving our country. This benefit would be rendered useless if it is granted to everyone.
You take out the loan, you repay it. In rare circumstances, that may not be possible, and we should consider tweaking such things as bankruptcy laws. But the fact that one should repay one’s debts should not be the least bit controversial.
Out of 255 million adult Americans, just 45 million have federal student debt. If economic relief is in order, it’s highly inequitable to distribute tens of thousands of dollars to the 45 million while the other 210 million get nothing.
Sources: Cato Institute
Doesn't Fix The Problem
Forgiven student debt does not simply vanish. It gets transferred to the national debt and becomes a liability for taxpayers rather than borrowers.
Student debt forgiveness might provide the economy a temporary sugar high as debtors spend the windfall they’ve received from canceled loan payments, but eventually the bill has to be paid.
How To Fix The Problem
Federal student loans offer colleges and universities excessive funds that enable them to raise their tuition without fear of losing customers. Americans should be holding colleges and universities accountable by tightening the purse strings coming from Washington.
Eliminating federal student loans will encourage colleges to step up their game, lower their prices, and maybe even begin teaching marketable skills. Loan forgiveness doubles down on the failed federal policies that led to the current student loan crisis.
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