Biden's Student Debt Plan: A Godsend? An Appalling Policy? A Debate.
Rep. Ro Khanna says the White House didn't go far enough. Sen. Tim Scott says the plan is inflationary, illegal and hurts the poor.
Depending on your politics, last week President Joe Biden transformed the lives of millions of young Americans saddled with college debt—giving them a chance to pay down their student loans, buy homes, and, one day, send their own kids to college. Or, last week President Biden saddled a new group—this one not so upwardly mobile—with a much higher tax bill for choices they didn’t make and can’t afford, while plunging our economy even deeper into inflation.
Who is right?
To debate this important subject, we invited two politicians we admire for their willingness to speak candidly and thoughtfully about some of the thorniest issues confronting the nation.
Ro Khanna is a Democratic congressman from northern California, whose district encompasses Silicon Valley. He recently wrote a book called “Dignity in a Digital Age: Making Tech Work For All of Us.”
Tim Scott is a Republican senator from South Carolina. (Perhaps you heard him recently on Honestly.) He is the author of the new book “America, a Redemption Story: Choosing Hope, Creating Unity.”
Biden Didn’t Go Nearly Far Enough
By Rep. Ro Khanna
Last week, President Biden announced that he will forgive $10,000 in student loan debt for Americans making under $125,000 per year and up to $20,000 for recipients of Pell Grants. Many progressives are celebrating this as a win, but I don’t think it goes nearly far enough.
In order to truly help working- and middle-class Americans, we need to cancel up to $50,000 in student loans. This would help 95 percent of borrowers and do more to improve the lives of those struggling the most.
President Biden has already used the power of the executive branch to pause federal student loan repayments and forgive interest payments on these loans. If he can suspend interest payments—a form of forgiveness—then he can forgive the principal. But we can’t just cancel student debt without also addressing the problems in our country’s education system that have led us to the situation we currently face: $1.7 trillion in student debt.
In America, we have a publicly funded education system for students from grades K-12. But most students recognize that to maximize their chances of having a good-paying job in our modern economy—including in the trades—they still need more than a high school degree. Faced with this monumental decision as early as 16, students begin applying to colleges and work-training programs.
Most 16-year-olds have no concept of just how much higher education will cost them. To pursue it, nearly one-third of all American students need to take out loans to cover tuition and living expenses. Some run into issues with their family or health and are forced to drop out of school after taking out loans. And with the astronomical price of higher education, many are saddled with life-altering debt.
This story—a hard-working student whose dream was upended by debt—affects tens of millions of Americans today. At one point, I was among them, with over $100,000 in loans, having trouble making my monthly payments, and ultimately taking a year forbearance which created even more debt. I repaid my loans thanks to good fortune and opportunities, but not everyone is so lucky. I’m glad that others are getting relief now. The goal should be to make our country better for everyone.
Critics argue that forgiving student loan debt is regressive—that it rewards the wealthy and punishes the poor. Florida Gov. Ron DeSantis captured that perspective perfectly when he said, “It’s unfair to force a truck driver to pay a loan for someone who got a PhD in gender studies.”
They are wrong.
Forgiving this debt is progressive economic policy. An analysis from the Roosevelt Institute found that debt cancellation would most benefit those with the least amount of wealth.
Another argument from detractors is that this will only benefit those who have already been launched. Tell that to the nearly 40 percent of people with student debt who ended up not receiving a degree, and who are more than four times as likely to default on it. Or tell it to the first-generation college graduates who have to take on more student debt on average than their second-generation counterparts.
Student loan forgiveness is also essential to overcome the racial wealth gap: The same Roosevelt Institute study found that canceling up to $50,000 in student loan debt would immediately increase the wealth of Black Americans by 40 percent.
In fact, every American will benefit because forgiving student debt could help reduce the inflation causing so much pain and hardship. Although some economists have raised concerns about the impact this move will have on the economy, Nobel Laureate economist Joseph Stiglitz points out that most people with student loan debt have not been making payments during the pandemic and don’t have the means to repay them. This means there won’t be a rush of new inflationary spending. Instead, people will have more credit in the long run to create a business, start a family, and strengthen our economy.
While canceling student loan debt is key to resolving the current crisis, it does not fix the underlying problems that led to the debt crisis. We need to ensure that we do not find ourselves in another similar situation. The way to do this is to recognize that an adequate education is a right, not a privilege.
With so many Americans searching for educational opportunities after high school, K-12 should be extended to pre-K-14 or K-16, with opportunities to attend either trade school or college. Just as in other western democracies, students in America should be able to attend these institutions at little to no cost, so they can pursue ambitious dreams with less risk. It will also help train Americans to have better skills to make us competitive with rivals like China.
Some critics will surely object. Why spend public funds on student loans, public college, and vocational school when there are other pressing needs for public funding?
The answer lies in how much you think our society should value education. Europe has its answer: Higher education there costs on average less than $2,225 a year. China is churning out millions of electricians, tradesmen, engineers, and scientists by paying for their education. Why do we lag so far behind? Spending on an adequate education, including post-secondary education, must be a paramount priority for our country and people to thrive in the 21st century.
An Appalling Burden on the Poor
By Sen. Tim Scott
It’s an appalling thing to ask the average American worker, who is struggling to afford groceries and gas, to subsidize the college debt for a household making six figures. It’s even more astonishing to ask a worker to do so during the worst inflation in half a century.
Yet that is exactly what President Biden just did.
The White House claims that its plan, announced last week, “cancels” $500 billion in student loan debt and relieves 40 million borrowers. But “loan cancellation” is an Orwellian phrase. You can’t cancel debt—someone always has to pay.
And I know exactly who will: Workers just like my mom.
I grew up in a single-parent household in South Carolina with a mom who worked double shifts as a nurse’s aide. My mom is one of millions in this country who wasn’t able to go to college. Even if she’d been able to qualify for loans, taking on that kind of debt would have crippled our family. Instead, she worked hard to provide for my brother and me—to put food on the table and keep the lights on.
President Biden may claim to care about hard-working Americans like my mother, yet he’s shifting half a trillion dollars of student loan debt onto everyday taxpayers. It’s inflationary, it’s illegal, and it helps those who need it least: higher-income college graduates.
Let’s take each of those in turn.
Start with what this executive action will do to our already ailing economy. In announcing the plan, President Biden said “the whole economy” will be “better off.” But nothing could be further from the truth. Anyone who has taken Econ 101 can tell you that nothing is free. Biden’s plan is estimated to cost American taxpayers at least $2,000 each.
The plan is also illegal. President Biden’s Department of Education relies on a heavily disputed interpretation of legislation passed in the aftermath of the 9/11 terrorist attacks, which gives the president some additional powers during a national emergency. The idea that this peacetime president is exploiting a loophole in wartime legislation is unprecedented, offensive and a clear abuse of power. In fact, when the president flirted with the idea of a student debt “cancellation” earlier this year, even Speaker of the House Nancy Pelosi said it wasn’t in the scope of his authority. “People think that the President of the United States has the power for debt forgiveness. He does not,” she said. “That has to be an act of Congress.”
Doubting that he would be undeterred by the legal limits, I recently introduced the Student Loan Accountability Act, which further clarified that the Secretary of Education does not have the legal authority to implement mass loan cancellation.
Nonetheless, the president moved forward. Suddenly, Speaker Pelosi is rather quiet on whether she still believes this move is illegal. It’s not surprising that politicians on both sides of the aisle have come out against this move. Former President Obama’s top lawyer at the Department of Education announced his skepticism earlier this year. And even President Biden himself called the president’s authority to forgive debt “pretty questionable” before taking office.
Then there is the question of who this plan will actually help. White House talking points push the lie that this plan will help the middle class and low-income families. That’s nonsense. By their own admission, this plan bails out those making $125,000 or a married couple earning $250,000—people who could hardly be classified as middle class, much less low-income.
The reality is that college graduates make an average of $78,000 a year, while those with a high school education earn around $38,000. President Biden’s plan essentially tells those Americans making $30,000 a year and working paycheck to paycheck that—in the midst of record-high inflation—they must fork over even more money to lighten the load for those making higher salaries.
It is fundamentally unfair and wrong to ask those who didn’t agree to loans and are making less to pick up the tab for those who did agree to loans and are making more. Furthermore, this move has the potential to be catastrophic for the U.S. lending system. The executive branch is sending a message to both banks and borrowers that their legal agreements can be overridden at the stroke of a pen. Introducing this type of uncertainty will not only lead to more loans, but will give universities power to raise tuition prices even higher.
Don’t just take my word for it. Listen to what Paul Begala, President Clinton’s top advisor, said this past weekend on CNN: “What is my party doing with this? I think they’re not helping the people that we’re here to help, which is poor people and underprivileged communities.”
So why is President Biden doing this? With polls showing President Biden and the Democrats’ approval ratings at abysmal lows heading into the midterms, it’s clear they’re betting on this gimmick to inspire their own progressive supporters, since regular folks are fed up with the trajectory of the country.
If they really wanted to help working Americans, they would look to promote American energy production. Or they would look for solutions to actually reduce the cost of higher education, which this plan fails to address. Why not look to the benefits of expanding Opportunity Zones, which would create affordable housing and well-paying jobs in some of our poorest communities? Any one of these policies would have a direct impact on the people who need help the most.
Instead, nurse’s aides like my mom, flight attendants, UPS drivers, construction workers, taxi drivers, firefighters, and millions of other Americans who don’t have a four-year college degree will be further burdened at a time when they desperately need relief.
Not only is this a cynical, chauvinistic handout to the president’s voters in a midterm year, it’s likely to backfire. How will Democrats explain to their constituents why they must pay for an education that they didn’t receive?
They can’t. Which is why they refuse to say who will pay for this plan.
Yet the facts are clear: this does not address the real problems of college affordability. It does nothing to energize this stagnant economy and failing job market. And it only worsens inflation and makes life harder for ordinary Americans.
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