Federal student loan debt cancellation and payment pause: Is Biden right?
- President Biden has prolonged the student loan payment grace period several times, the latest extension moving the deadline from August 2022 to December 31, 2022. His administration announced his initial “campaign promise” to cancel $10,000 of student debt for low to middle income borrowers along with $20,000 debt cancellation for Pell Grant recipients.
- Former President Trump first granted student loan relief in March 2020 during the first spikes of the pandemic, then extending it to October, and again in December. Before leaving office, he extended deferment until January 31, 2021.
- A June 2022 NPR/Ipsos poll found that 55% of the general public supported forgiving $10,000 of an individual’s federal student debt, while 47% supported canceling $50,000 in debt.
- According to Forbes, there are 45 million Americans who owe a combined total of $1.7 trillion in student loan debt as of May 2022. Younger borrowers between the ages of 25 and 34 hold the majority of debt, about $500 billion in federal student loans.
Pausing and forgiving student debt is a smart move for the economy. Canceling this debt literally means that millions of borrowers will be able to spend the several hundred dollars a month they would otherwise spend on student loan payments on goods and services in their local economy. This could be a lifeline, not only for the borrowers but also for those businesses who might be seeing reduced sales due to recent cost of living increases.
While some may claim that forgiving student debt is unfair or rewards those who borrow recklessly, it's worth looking at how unfair student debt really is in the first place. Virtually no other lender would offer an eighteen-year-old the option to take on these incredible amounts of debt. Society has decided that college freshmen are not yet mature enough to drink alcohol but are somehow responsible enough to take on the kind of debt that will hamstring their financial well-being for decades. Further, unlike other types of debt, student loans are virtually impossible to walk away from, despite the very real hardships many borrowers face. Additionally, this forgiveness will not apply to those earning more than 125K per year, as there is less reason these individuals wouldn't be able to make debt repayments.
Finally, this is a wise political move for President Biden. He campaigned on this issue, and voters will expect him to keep his promises, especially ahead of a midterm election. Helping the very voters that brought him into office during this trying time is good for the economy, good for working Americans, and good for the President.
Debt forgiveness means 'to grant relief from payment of.' Debts do not magically disappear; they are merely shifted to another demographic group—in this case, the general taxpayer who did not take out the loan or may not have even attended college. Government debt forgiveness adds to its already expansive deficit. Considering the debilitating effects of the current inflation, adding more debt through this federal bailout exasperates the pressures many Americans experience.
Likewise, 2022 Pew Research data reveals that only 37.9% of Americans have a four-year college degree with 14.3% obtaining a graduate degree. This means most student debt is held by those who increasingly took out loans to gain higher degrees. The Government's role is not to rescue and guide only educated demographics into prosperity. It is the parent's job to teach their children about responsible debt and repayment. Transferring the burden of some debts but not others (like mortgages, car leases, small business loans, etc.) is clearly unfair, and could signal to future generations that they can take on more debt “with the expectation that those amounts may be eliminated in the future.'
An alternative to the Government taking on this debt is utilizing the forbearance, deferments, or even income-based restructured loans offered by student loan lenders. Let us also remember the thousands of college graduates who saved and slaved to pay their debts. 'An awful lot of Americans choose not to go to college…and then there are those Americans who borrowed money to pay for school and paid it back,' says Mitch McConnell. For a party constantly calling for 'equity,' it's unfair to change the game's rules in the middle of it and shift debt to people who do not consent to pay what others owe.