President Biden announced he is unilaterally — meaning without the joinder of Congress which is supposed to control the Federal purse — forgiving college loan debt of $10-20,000 (Pell Grants) for individuals making up to $125,000 or families making up to $250,000.
The Committee for a Responsible Budget scores this Executive Order as costing somewhere between $440B to $600B.
There has been both a huge outcry against and for this policy. Here are some thoughts.
1. Total college loan debt is more than $1,750,000,000,000 – that is $1.75T. This is bigger than credit card debt in the US. Hello, America!
Credit card debt is about $850,000,000,000 — $850B — versus college loan debt of $1.75T.
Total auto loan debt in US is $1.45T.
2. Total borrowers are in excess of 48,000,000 with 45,400,000 being indebted to the Federal government.
3. More than 15,000,000 borrowers owe less than $10,000. More than half of the borrowers owe less than $20,000.
4. Only 4.7% of those 48,000,000 loans are in delinquency.
5. 55% of undergrads left college in 2020 with a loan balance of approximately $28,400. If you attend grad school, you will likely borrow an additional $71,000.
6. The average monthly payment for all student loans is less than $300.
7. About 1,400,000 public service borrowers will have their loans forgiven under the Public Service Forgivness Plan whereby a borrower agrees to take job in public service in return for loan forgiveness.
8. The average loan forgiven under the PSFP is $97,000.
The Emotional Plea
Joe Biden ran for President promising to forgive student loan debt, a shibboleth of the liberal left and progressives.
What is the emotional case for forgiving college loan debt?
1. Graduates are “drowning in debt.”
2. Loan debt is an impediment to innovation.
3. College should be affordable. Well, college should be free is more like it.
Does it pass the smell test, Big Red Car?
Of course not. Here are the facts:
1. Would you invest $28,400 (the average level of loan debt for borrowers) in yourself and your future?
2. Is $28,400 really “drowning in debt?”
3. In today’s economy, can you get a job that is sufficiently compensated to be able to make a $300 average loan repayment monthly?
The Fairness Test
The Biden loan forgiveness program is $10-20,000 (Pell Grants) for families making less than $250,000 annually and individuals making less than $125,000.
1. About 42% of Americans who are older than 25 have a college degree – meaning an associates or bachelor’s degree.
2. The universe of those who will benefit from this program are educated and should have superior job prospects.
A new college grad earns a median salary of $52,000 whilst a high school grad earns a median salary of $30,000.
College provides a $22,000 advantage from the beginning and it accelerates with time.
3. Nobody who did not receive a college degree will benefit from this program meaning the remaining 58% of Americans who did not go to college will inequitably subsidize the lives of those who did go to college.
4. Nobody who saved their money and paid their tuition with cash will benefit from this program.
5. Families that paid for their childrens’ tuition will not benefit from this program.
6. This benefit will be paid for by working class folks – plumbers, carpenters, bed pan changers, minimum wage workers – and will benefit folks making $124,000 and families making $250,000.
Bottom line it, Big Red Car
OK, dear reader, we are a couple of months from the mid-term elections and Joe Biden is losing support amongst Gen Z voters, so he is renting votes by forgiving debt.
This is a grossly unfounded program – for goodness sake, the average student loan debt is less than $25,000 and the average monthly loan payment is $300. This is not a plague.
The delinquency rate is only 4.7%.
This is an unfounded, unconscionable, pandering attempt to rent votes by passing the cost of college onto those who did not borrow money or go to college. Even Nancy Pelosi used to say it was unconstitutional absent Congressional action.
Shot across the bow: Joe Biden says he is “doing everything” to combat inflation including the passage of the faux Inflation Reduction Act that is scored to reduced the deficit by $100B starting in 2027. If you believe that . . . . .
This single action will increase the deficit by $440,000,000,000 to $600,000,000,000 immediately and inject all that money into the economy through increased demand and will trigger even more inflation. This injection of money is bad juju when it comes to controlling inflation.
This is just using your taxes to rent votes. Nothing more.