This week, the Biden administration announced a plan to forgive up to $20,000 in student loan debt for millions of Americans. The plan applies to households making up to $250,000 a year (or $125,000 for individuals), an income threshold that targets the middle class and upper middle class and many high-earning professionals.
A core part of our mission at the Georgia Center for Opportunity is to give the poor and working class a leg up on the economic ladder. This doesn’t come through cycles of generational government dependence, but through career training and credentialing that provides the pathway to fruitful full-time work and, ultimately, a better life.
We believe the White House’s plan is wrong on many levels, but a top way is the way it unfairly penalizes the poor and working classes, which disproportionately do not have college degrees and have not attended any college at all.
Many of these individuals are working service-oriented jobs, entry-level positions, or laboring in the skilled trades. They are paying taxes. Yet under the Biden administration’s plan, they will bear the burden of paying off the student loans of their wealthier neighbors through their tax dollars.
Here are four additional ways that student loan forgiveness is ill-advised:
1. It will contribute to already high inflation
Another way this plan hurts the poor and working class is by increasing inflation. This demographic spends a disproportionate share of their income on essentials like food and gas that have seen the most dramatic price increases in recent months.
As the Brookings Institution points out, $10,000 in debt forgiveness “would involve a transfer that is about as large as the country has spent on welfare … 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.”
2. It doesn’t actually forgive anything
The White House has labeled the plan a “forgiveness” of student loan debt. But in reality, this approach simply transfers the burden onto the backs of taxpayers.
3. It penalizes hard-working Americans
We’ve already discussed how the poor and working classes are treated unfairly by this plan. But the unfairness extends to many middle class families as well who worked hard to pay off their student loans or their children’s student loans. Once again, government policy is punishing hard work.
4. Finally, it does nothing to address the affordability problem in higher education
According to Forbes, between 1980 and 2020, the cost of a college education jumped 169%. Meanwhile, the economic value of many four-year degrees has declined. The rapid inflation in the cost of college is, in large part, due to rampant government subsidies in higher education. Forgiving student loans only makes that problem worse.
