By Ben Ritz
Last week, President Biden reportedly told a group of lawmakers who urged him to cancel at least $10,000 of student debt for every borrower through executive action, “you’re going to like what I do on that.” Although there are some worthwhile forms of debt forgiveness, these reports are cause for concern. Broad debt cancellation would be an expensive, regressive giveaway to affluent households that worsens inflation and detracts from more meaningful efforts to address the college affordability crisis.
Student loan debt is disproportionately held by affluent households because the degree they borrowed money to pursue enhances their earning power. Considering the enormous costs of a college education today, it makes sense to offer relief to borrowers with low lifetime incomes – people who are stuck with the debt of degrees without being able to reap the financial benefits. That’s why I urged President Biden last year to expand and reform income-driven repayment programs that directly tie debt cancellation to a borrower’s ability to pay.
But broader student debt cancellation is a regressive transfer of wealth from lower- and middle-income workers to high-income professionals. President Biden has already cancelled more student loan debt than any president in history, largely because of his decision to repeatedly extend a moratorium on minimum payments and interest accrual. The greatest beneficiaries of this policy have been high-income professionals, such as doctors and lawyers, who have on average had at least $30,000 of debt effectively cancelled by the policy so far.
