The Biden administration is considering a massive scheme of student loan debt forgiveness, so let’s look at the facts.
Let’s start with some simple statistics. In 2019, only 32.1% of the adult population over 25 had a bachelor’s degree. The total outstanding student loan debt is $1.75 Trillion. Simple question, who is paying for debt forgiveness? If the answer is taxpayers, then a lot of people who never even went to college are paying to forgive the debt of those who did. Why does this matter?
People with college degrees are privileged, and forgiving the debt increases that privilege and worsens inequality.
In 2020 the median income for a high school graduate without college was $41,028. This means that half of all high-school-only graduates make less than this figure. I think we can all imagine people that would be thrilled to make $41k a year. For better context, a $15 an hour job would only be $31,200 a year (before taxes).
On the flip side, 2020’s median income for a college graduate was $73,632. Financially, that can be a life-changing difference. It should be abundantly clear from this simple comparison that on average, the people with a college degree are doing much better than the people without a college degree. The benefits of debt forgiveness are concentrated on those with debt and the costs of debt forgiveness are distributed among those who don’t.
This is a transfer of wealth from people without debt to people with debt. Many of the people without debt never went to college and are doing economically worse than those who did. A college degree increases lifetime earnings, and it is not unreasonable to think that the beneficiaries of the degree should use their increased earnings to pay for that degree.
Here is a statistic from Brookings: “The highest-income 40 percent of households (those with incomes above $74,000) owe almost 60% of the outstanding education debt and make almost three-quarters of the payments.”
Additionally, in 2019, 56% of that debt was held by people with master’s or doctoral degrees. This means doctors, lawyers and anyone else that went to grad school. People in the legal and medical professions are some of the highest-paid, privileged people in America.
Consider the audacity of asking a plumber to pay off a loan for an investment banker with a degree in finance. “I graduated from Stanford and all I got was a job at Goldman Sachs and 100 grand in student loans.” Most people would respond: Go away. “But New York City is so expensive!” Again: Go. Away.
Whatever the Biden administration decides to do on this issue, blanket loan forgiveness is a bad idea. It is a looting of the treasury and it is embarrassing that so many seem to think that giving more than $900 billion to a group including doctors and lawyers is the best way to help the poor and working class.
Rest assured that the vast American middle class will not be happy with a huge wealth transfer from their wallet to those of their more elite, wealthy neighbors. Student loan debt forgiveness is a recipe for political and economic disaster.
• Stewart Dompe is a fellow at Young Americans for Liberty. He earned his doctorate in economics from George Mason University, and his B.A. in economics from Santa Clara University. He is from California and lives in Alexandria, Virginia.
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