A student debt cancellation plan backed by President Joe Biden would cost taxpayers hundreds of billions of dollars and mostly benefit well-to-do earners, according to a study released on Tuesday.
The analysis, from the University of Pennsylvania Wharton School, said the plan, which would cancel thousands of dollars per borrower in student loans, will also worsen inflation at a time when Americans are already paying near-record level prices for a range of goods and products.
According to CNN, the White House is eying a plan to cancel $10,000 of student debt per borrower for those earning under $125,000, but some Democrats want to raise that to $50,000 per borrower.
The White House is expected to announce its plan on Wednesday, even as the administration considers extending a current moratorium on student loan debt payments which is set to expire Aug. 31.
The Daily Wire adds:
Nixing $10,000 of student loans per borrower would cost $298 billion in 2022 and a total of $329 billion by 2031 if the policy is renewed each year, according to the nonpartisan Wharton analysis. Less than 32% of the funding would benefit Americans in the two lowest income quintiles, while 42% would benefit those earning more than $82,400 per year.
“People in higher income households are more likely to have student debt and they owe more on average. So, most cancellation plans would benefit the wealthy more than middle-or lower-income families,” Cato Institute education policy analyst Colleen Hroncich the outlet.
The Brookings Institute has noted in its own report on the issue that one-third of student debt is currently owed by the wealthiest 20 percent of American households, while just 8 percent is owed by the bottom 20 percent. The report said that is due, in large part, to the fact that more degrees are usually required for higher-paying positions and professions.
“Postsecondary education typically results in much higher lifetime earnings — $1.2 million for a bachelor’s degree and $3.1 million for a professional degree like law or medicine,” Hroncich told the Daily Wire.
According to the Wharton School analysis, a permanent cancellation announcement by the White House could also lead student debt holders to “eventually reorganize their financing toward additional borrowing.”
And while the plan may lead to additional access for students who otherwise would not be able to afford additional or higher degrees, the universities would likely be poised to benefit “in the form of higher prices” stemming from increases in tuition.
“All federal student aid creates market distortions through tuition and credential inflation,” Hroncich continued. “When government gives people money to attend college, there will be more demand for college. And when more workers have college degrees, employers start looking for workers with degrees even for positions that historically did not require one.”
It’s likely that Biden is calculating this plan will bolster his support among younger Americans — buying their votes, in essence.
“[T]he most recent edition of the Harvard Youth Poll indicates that Biden’s approval rating among young voters is a meager 41% — constituting an 18% decline since the spring of 2021. Likewise, the poll showed that young Republicans are more likely to vote than their Democrat counterparts in the upcoming midterm elections,” the Daily Wire reported.
