Since 1980, college tuition has skyrocketed, rising twice as fast as inflation. In a misguided attempt to correct this trend, President Joe Biden announced a student loan forgiveness plan. This move ignores the root causes of student debt, instead leading to an increase in the cost of higher education.
On Aug. 24, those with federal student loans qualify for $10,000 in loan forgiveness if they earn less than $125,000, and will see canceled debts of up to $20,000 if they formerly received pell grants. This unprecedented and sweeping legislation affects the majority of the 40 million Americans with student debt, and 8 million could receive immediate relief, as the government already possesses their income data. Biden extended the pandemic pause on federal student loan payments until the end of the year. He also forgave all unpaid monthly interest for these loans to prevent student debt from growing even if students ceased making payments.
This plan will cost taxpayers $300 billion over the next 10 years, according to a new study by Penn Wharton, yet economists estimate that student debt (presently $1.4 trillion) will return to its current level in four years. Biden’s loan forgiveness plan only helps students who applied for federal aid before July 1, 2022. Rather than encouraging more Americans to pursue degrees, the bill assists current college students and those with degrees. According to the Federal Reserve of New York, all but 2% of college graduates secure employment, begging the question of why Biden targeted this already employed and educated group to be the recipients of wealth redistribution. The Republican National Committee referred to the bill as “Biden’s bailout for the wealthy.” This audacious bill helps those who least need the money while doing nothing to prevent the debt from reoccurring.
Loan forgiveness discourages students and their families from saving and planning for a college education and penalizes those who do. Biden’s bill leaves many financially responsible families facing the realization that years of planning and hard work were unnecessary.
Biden’s bill neglects all those without a college education and all resourceful college graduates who already paid for their college education. Instead of finding themselves a step ahead, hard-working Americans are $10,000 to $20,000 behind, or worse: entitled and dependent on the government for continual bailouts.
As Americans face rising prices and already inflated tuition costs, Biden’s plan encourages colleges to raise tuition still higher since students will be less concerned with procuring debts. Canceling student loans invites a dangerous cycle of increasing tuition costs because of potential loan cancellation and the subsequent need for more loan cancellations to cover the rising tuition. Biden’s desire to decrease American student loans is admirable, but instead of addressing the root cause of runaway tuition costs, he is pouring oil on an already raging fire. As college tuition rises, Americans will have Biden’s capricious student loan forgiveness to thank.
