Biden’s student loan debt plan is driven by politics, not economics – The Boston Globe

by | Aug 28, 2022 | Financial

On Wednesday, President Biden announced his long-awaited plan to cancel student loans — effectively wiping away up to $10,000 for borrowers with individual income below $125,000 (and couples with joint income below $250,000). The administration’s plan forgives up to $20,000 for Pell Grant recipients under the same income limits.The move, which will cost taxpayers hundreds of billions of dollars, lacks any economic rationale and reeks of political motives. Advocates for cancellation argue that it was needed to help economically disadvantaged Americans and to work toward closing the racial wealth gap. The problem is that it hardly achieves either of those goals; it delivers the most benefits to people earning far more than the average American and awards the bulk of relief to white households.AdvertisementThe media often portray borrowers with student debt as economically disadvantaged, but the reality is that people with debt are often among the highest earners in the economy. That’s because the economic return on education is large. Biden’s decision to exclude the highest earners from eligibility for student loan relief makes the plan less regressive than it otherwise could be. But the cutoff, $125,000 for individuals, means that borrowers earning three times the median income in the United States are still eligible for this giveaway.Get Weekend Reads from IdeasA weekly newsletter from the Boston Globe Ideas section, forged at the intersection of ‘what if’ and ‘why not.’More important, the plan delivers nothing to the actual most disadvantaged group in the economy, workers without any education after high school, which make up more than one-third of the adult population. These people will receive nothing from this round of handouts but will be on the hook to face the consequences of the spending; some combination of higher taxes, a …

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