Student loan forgiveness is welfare for middle and upper classes
The Democrats are hellbent to transfer money to a section of their voting base: Relatively young liberal arts college graduates, many of whom belong to the upper and middle classes. The numerous student loan pauses, as well as demands to fully forgive student loans, have little to do with the pandemic and everything to do with a political goal ahead of the 2022 midterms.
After all, if the economy is as strong as White House press secretary Jen Psaki constantly insists, why would the college-educated need a sixth pause in payments or full bailout? Should President Biden take the next step and issue blanket student loan forgiveness, as many in his party are loudly demanding, there would be severe economic impacts at the expense of working taxpayers — including minority and blue-collar workers, who would be forced to foot the massive bill.
Contrary to the picture painted by left-wingers of greedy banksters taking advantage of impressionable young students, 92 percent of student loan debt is held by the federal government — not by private banks. Most of these loans offer an interest amnesty until after graduation. Furthermore, the richest 40 percent of the American public holds 60 percent of the student loan debt, while the bottom 40 percent holds just 20 percent of the debt.
By 2019, over half of student loan debt was held by those with master’s or doctorate degrees; in other words, those who are typically in the best financial position to pay off their loans are the ones benefiting from the successive student loan repayment pauses. The student loan pauses have cost taxpayers $120 billion so far — and the latest one will tack on another $17 billion. If student loan debt were fully forgiven, there would be an almost $2 trillion bailout.
If widespread student loan forgiveness materializes, efforts to limit it from those earning over a certain amount would not work as intended. New graduates often work at lower-wage jobs or internships for the time being; future large-salary earners would see their loans wiped away. In time, most of those who would receive debt forgiveness would earn more — much more — than their high school diploma counterparts. Overall, those with college degrees earn $900,000 more over their lifetimes than those with just high school diplomas. For those with graduate degrees, the gap is even more stark: Men in that cohort earn $1.5 million more, and women earn $1.1 million more over their working years. The largest share of the benefits flows most heavily to those who generally need it the least.
Even if the federal government found a way to bail out only graduates who aren’t on track to make large salaries, such a move would be illogical. Why should plumbers who went to trade school be forced to bail out those who chose to take on hundreds of thousands of dollars in debt to obtain degrees in philosophy, art history, or Kazakh film?
Joe Biden’s presidency so far shows an incredible cynicism towards American society and its inherent strength. When you subsidize something, you get more of it. A new wave of graduate degrees from private liberal arts schools won’t provide a worthwhile stimulus to the American economy. Unfortunately, the expectation of loan forgiveness — even if it does not materialize — would incentivize young people to pursue expensive, non-practical degrees at the most prestigious schools possible. Graduate schools offer the most student loan debt, and if the wrong major is chosen, the fewest opportunities. Ask the “financially hobbled” graduates who earned a Master of Fine Arts in film at Columbia University at the cost of hundreds of thousands of dollars. Meanwhile, these colleges would be able to continue raising their obscene tuition, knowing that the government would pay whatever cost they demand.
The best way to make college affordable is to get the federal government out of the college business. The feds fund most of the student aid, and most college students can qualify for as much money as they need to cover the cost of tuition — regardless of the price tag or personal credit history. These taxpayer-funded loans are given out with artificially set interest rates, and with zero regard for the earning potential of secondary education. This system allows colleges to hike tuition each year with impunity, because no matter what they charge students can finance it with government money.
Even worse, both the pauses and a potential full bailout are not only subsidized by all our tax dollars but will saddle us with another type of burden: more inflation. Working stiffs pay in for this massive bailout, while those who found their five- or six-figure debt forgiven would spend artificially printed dollars. When you realize that you cannot afford the same amount of groceries for your family as you could a year ago, or cannot afford to fill up your gas tank, remember each step that got us here. The Democrats want to bend the federal government for the well-off, and demand that you pick up the tab.
Kristin Tate is a visiting fellow at the Independent Women’s Voice and a libertarian writer. Her latest book is “How Do I Tax Thee? A Field Guide to the Great American Rip-Off.” Follow her on Twitter @KristinBTate.
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