Biden’s student-loan socialism is a slap in the face to every family who sacrificed to save
This free cash-giveaway is astonishingly unfair. – Emil Ficker
“President Biden’s student-loan socialism is a slap in the face to every family who sacrificed to save for college, every graduate who paid their debt, and every American who chose a certain career path or volunteered to serve in our Armed Forces in order to avoid taking on debt,” Senate Minority Leader Mitch McConnell wrote in a statement. “This policy is astonishingly unfair.”
Socialist call it a racial issue and refuse to say how pays?
Rep. Pramila Jayapal of Washington, the chair of the House Progressive Caucus, said that student-loan relief would help address racial inequities. “Canceling student debt is a racial justice issue and will help to close the racial wealth gap. This is a major step forward,” the socialist tweeted.
Congress should pay for it…
Rep. Chris Pappas of New Hampshire, who also faces a difficult reelection campaign, argued that the issue should be left to Congress. “We all know the cost of higher education is crushing families, and that’s why I’ve supported expanding Pell Grants, affordable community college, and loan forgiveness for those entering vital professions like nursing,” he said in a statement. “But this announcement by President Biden is no way to make policy and sidesteps Congress and our oversight and fiscal responsibilities.”
Reporter is forced to ask WH press secretary same question six times because she won’t answer directly: ‘Who is paying for this?’
Who is paying for student-loan forgiveness?
White House press secretary Karine Jean-Pierre repeatedly dodged a simple question on Wednesday about President Joe Biden’s student loan debt forgiveness plan.
The White House press briefing was the first one held in more than two weeks.
What happened at the White House press conference?
When it was Fox News correspondent Peter Doocy’s turn to ask a question, he chose the obvious, “How can the country afford such a massive handout?”
What followed was a lengthy exchange in which Jean-Pierre claimed the Biden administration has brought down the budget deficit by $1.7 trillion, suggesting those purported savings are what will pay for student loan debt forgiveness.
But after she attacked Republicans for passing tax cuts during the Trump administration, Doocy was forced to ask the same question six times because Jean-Pierre repeatedly dodged his line of inquiry.
“Who is paying for this?” Doocy asked.
At first, Jean-Pierre cited the alleged $1.7 trillion in deficit reduction. But Doocy quickly pointed out that “forgiving” student loan debt does not make it disappear. So he asked again, “Who is paying for this?”
Next, Jean-Pierre tried to claim that lifting the moratorium on student loan payments will help pay for the cost of Biden’s plan. But by her own admission, the revenue generated from payments pales in comparison to the estimated cost of the plan.
“But somebody is paying for it. Who?” Doocy asked again. “Is it wealthy Americans? Is it corporations? Who is paying?”
Jean-Pierre, however, never really answered the question. Instead, she claimed Biden’s COVID-19 stimulus bill, the Inflation Reduction Act, and “all of this work that this president has done” has produced $1.7 trillion in deficit reduction.
The press secretary then abruptly moved on to the next reporter.
How big are Biden’s student-loan plans?
After this giveaway there will be total forgiveness… illegal and unpopular, but the Marxist ideology that’s all the rave with Biden’s young socialists demands it. = Emil Ficker
Even modest student loan forgiveness proposals are staggeringly expensive and use federal spending that could advance other goals. The sums involved in loan-forgiveness proposals under discussion would exceed cumulative spending on many of the nation’s major antipoverty programs over the last several decades.
There are better ways to spend that money that would better achieve progressive goals. Increasing spending on more targeted policies would benefit families that are poorer, more disadvantaged, and more likely to be Black and Hispanic, compared to those who stand to benefit from broad student loan forgiveness. Indeed, shoring up spending on other safety net programs would be a far more effective way to help low-income people and people of color.
Student loan relief could be designed to aid those in greater need, advance economic opportunity, and reduce social inequities, but only if it is targeted to borrowers based on family income and post-college earnings. Those who borrowed to get college degrees that are paying off in good jobs with high incomes do not need and should not benefit from loan-forgiveness initiatives that are sold as a way to help truly struggling borrowers.
Putting Loan Forgiveness In Historical Perspective
Has Biden really lowered the deficit by $1.7 trillion?
The talking point sounds great. But it’s not true.
What is true is the deficit has been reduced by about $1.7 trillion between 2021 and 2022 — but not because of Biden.
When the COVID-19 pandemic hit in 2020, government revenues dried up as businesses shut down. The significant reduction in tax revenues combined with the trillions of dollars in pandemic relief caused the national deficit to quickly balloon.
This means the deficit was always going to decrease because pandemic-related spending has waned.
CBO projects that the federal budget deficit will shrink to $1.0 trillion in 2022 (it was $2.8 trillion last year) and that the annual shortfall would average $1.6 trillion from 2023 to 2032. The deficit continues to decrease as a percentage of gross domestic product (GDP) next year as spending related to the coronavirus pandemic wanes, but then deficits increase, reaching 6.1 percent of GDP in 2032.
As the CBO explained, a budget deficit of about $1 trillion still exists. Biden is therefore not saving Americans any money.
So the question remains: Who is going to pay for student loan debt forgiveness?
Biden planning largest transfer programs in American history
In terms of its scale in budget and cost to taxpayers, widespread student loan forgiveness would rank among the largest transfer programs in American history. Based on data from the Department of Education, forgiving all federal loans (as Senator Bernie Sanders proposed) would cost on the order of $1.6 trillion. Forgiving student debt up to $50,000 per borrower (as Senators Elizabeth Warren and Chuck Schumer have proposed) would cost about $1 trillion. Limiting loan forgiveness to $10,000, as President Biden has proposed, would cost about $373 billion. Under each of these proposals, all 43 million borrowers would stand to benefit to differing degrees.
To put those numbers in perspective, the chart below compares the cost of these three one-time student loan forgiveness proposals against cumulative spending on several of the country’s largest transfer programs over the last twenty years (from 2000 to 2019, adjusted for inflation).
Forgiving all student debt would be a transfer larger than the amounts the nation has spent over the past 20 years on unemployment insurance, larger than the amount it has spent on the Earned Income Tax Credit, and larger than the amount it has spent on food stamps. In 2020, about 43 million Americans relied on food stamps to feed their families. To be eligible, a household of three typically must earn less than $28,200 a year. The EITC, the nation’s largest antipoverty program, benefitted about 26 million working families in 2018. That year, the credit lifted almost 11 million Americans out of poverty, including about 6 million children, and reduced poverty for another 18 million individuals.
Forgiving up to $50,000 of student debt is similar in cost to the cumulative amount spent on Supplemental Security Income (SSI) and all housing assistance programs since 2000. Supplemental Security Income provides cash assistance to 8 million people who are disabled or elderly and have little income and few assets. Recipients must have less than $2,000 in assets. About half have zero other income.
The cost of forgiving $50,000 of student debt per borrower is almost twice as large as the federal government has spent on all Pell Grant recipients over the last two decades. In contrast to federal loans, which have no income eligibility limits and are available to undergraduates, graduate students, and parents, Pell Grants are awarded only to low- and middle-income undergraduate students with demonstrated financial need. About seven million students each year benefit, many of whom are poor and the majority of whom are non-white.
Even $10,000 in debt forgiveness would involve a transfer that is about as large as the country has spent on welfare (TANF) since 2000 and exceeds the amount spent since then on feeding hungry school children in high-poverty schools through the school breakfast and lunch program. Likewise, it dwarfs spending on programs that help feed low-income pregnant women and infants or provide energy assistance to those who otherwise struggle to heat their homes in winter.
Who Benefits from Comparable Transfer Programs?
Beyond the sums that debt forgiveness would represent, the beneficiaries of student loan forgiveness would be higher income, better educated, and whiter than beneficiaries of other transfer programs. The following table describes the economic and demographic characteristics of beneficiaries of selected income support programs as well as would-be beneficiaries of student debt forgiveness.
Food stamps, for instance, serve households whose median income is about $19,000 a year (half are in poverty), and provide $2,300 annually for the average household. Medicaid households earn about $33,000; about 34 percent are below the poverty line. Families that claim the Earned Income Tax Credit—the largest cash income support for working families—earn about $36,500; their average annual benefit is about $2,200.
In contrast, the median income of households with student loans is $76,400, and 7 percent are below the poverty line. Among those making payment on their loans (and who would have an immediate cash flow benefit from forgiveness), the median income is $86,500, and 4 percent are in poverty. If debt forgiveness were capped at $50,000, the average benefit to these households would be roughly $26,000—about the same as we provide a family living on food stamps over the course of 11 years.
In terms of demographics and educational attainment, households with student debt largely mirror the characteristics of households in the population at large, except they are better educated. Student loan borrowers are more likely to be white and highly educated. Indeed, among those making payments on student loans the fraction of households that are white is the same as in the population at large, but they are about 70 percent more likely to have a BA and twice as likely to have a graduate degree.
In contrast, households that benefit from federal programs, like SNAP, the EITC, SSI, or Medicaid, are more likely to be Black or Hispanic, and have much lower levels of educational attainment; few have gone to college, and almost none have a graduate degree.
For reference, among all households, the Census reports that 66 percent identify as white, 13 percent Black or African American, and 14 percent as Hispanic. About 42 percent have a BA and 18 percent a graduate degree.
In short, beneficiaries of across-the-board student loan forgiveness would be higher income, better educated, and more likely to be white than beneficiaries of just about all other programs designed to reduce hardship and promote opportunity and targeted to those who need help.
Prioritizing spending on targeted programs would therefore be a more effective way to achieve progressive goals. Biden’s proposal to make the child tax credit fully refundable, for example, would exclusively benefit children living in poverty. Twenty six percent of beneficiaries of that policy would be Black and 29 percent Hispanic. That is a progressive change that would lift the incomes of millions of very poor children. It would also benefit many student loan borrowers—as well as many who don’t have student loans.