Progressive proposals for total student debt “cancelation” (aka transfer to taxpayers) have long been plagued by a salient criticism: they mostly help the affluent. One study even found that full student debt cancelation would help the top 20% of earners 6x more than the bottom 20%. President Biden wanted to ensure that his executive action “canceling” $10,000-$20,000 in debt per borrower wouldn’t fall into this same hypocritical pattern, so he added some income constraints.
It didn’t work. Biden’s costly and arguably illegal student loan bailout will still mostly end up benefitting higher earners, a new analysis from the nonpartisan Committee for a Responsible Federal Budget confirms.
Their experts ran the numbers on Biden’s final proposal, including the income caps, and concluded that it will still offer 57% to 65% of its benefits to the top half of income earners. (And they say that even this might be an underestimate).
ANALYSIS: Even with the additional $10k for Pell recipients, the President's debt cancellation still mostly benefits higher earners.
— Marc Goldwein (@MarcGoldwein) October 3, 2022
That’s right: a majority of the benefits will flow to the top half, not the struggling poor and working class. Why?
Well, for one thing, any form of student debt relief only benefits those who attended college. And that’s a relatively more affluent slice of society—that’s why people go to college, after all.
So, too, the fact that the plan is “opt-in” will create a hurdle prompting some low-income people not to participate. And the fact that the Biden administration is using 2020 income data to determine qualification is going to highly skew the results, as many people briefly earned little/less during the height of the pandemic but have now fully recovered.
“In the end, the Administration’s student debt cancellation proposal is costly, inflationary, will drive up higher education costs, and will deliver the majority of the benefits to those in the top half of the income spectrum,” the Committee concludes.
Nice job, Joe.