Democrats are hell-bent on funneling money to a portion of their constituency: relatively recent liberal arts college graduates, many of whom are upper- and middle-class. The numerous deferrals of student loans and calls for a complete waiver of student loans have little to do with the pandemic and everything to do with a political goal before the midterms of 2022.
After all, if the economy is as strong as White House press secretary Jen Psaki constantly insists, why would college grads need a sixth payment break or a full bailout? Should President Biden take the next step and issue a blanket student-loan waiver, as many in his party are clamoring for, it would have serious economic repercussions at the expense of working taxpayers — including minorities and workers who would be forced to walk the giant Invoice.
Contrary to the left-wing image of greedy bankers preying on impressionable young students, 92 percent of student loan debt is held by the federal government — not private banks. Most of these loans offer interest amnesty until after graduation. Furthermore, the richest 40 percent of the American public holds 60 percent of student loan debt, while the bottom 40 percent holds only 20 percent of the debt.
As of 2019, more than half of student loan debt was held by individuals with masters or doctoral degrees; In other words, those who are normally in the best financial position to pay off their loans benefit from the back-to-back student loan repayment breaks. The student loan pauses have cost taxpayers $120 billion so far – and the latest will amass another $17 billion. If student loan debt were forgiven entirely, there would be a nearly $2 trillion bailout.
If there were widespread student loan forgiveness, efforts to restrict them from those exceeding a certain amount would not work as intended. First-year students often work in low-wage jobs or internships; future big earners would see their credit wiped out. Over time, most of those who would receive debt relief would earn more — much more — than their high school counterparts. Overall, those with college degrees earn $900,000 more over their lifetime than those with only a high school degree. The gap is even wider for college graduates: men in this cohort earn $1.5 million more and women earn $1.1 million more during their working years. Most of the benefits go most to those who generally need them the least.
Even if the federal government found a way to only bail out graduates who aren’t on track to earn high salaries, such a move would be illogical. Why should plumbers who went to trade school be forced to bail out those who decided to borrow hundreds of thousands of dollars to get a degree in philosophy, art history, or Kazakh film?
Joe Biden’s presidency so far shows an incredible cynicism about American society and its inherent strength. When you subsidize something, you get more of it. A new wave of degrees from private liberal arts colleges will not provide a worthwhile boost to the American economy. Unfortunately, the expectation of loan forgiveness—even if it didn’t materialize—would encourage young people to pursue expensive, non-practical degrees from the most prestigious schools. Graduate schools offer the most student loan debt and, if the wrong major is chosen, the fewest opportunities. Ask the “financially hobbled” graduates who earned a Masters of Fine Arts in Film from Columbia University for hundreds of thousands of dollars. In the meantime, these colleges would be able to keep increasing their obscene tuition fees, knowing that the government would bear whatever costs they charge.
The best way to make college affordable is to get the federal government out of the college business. Federal agencies fund most of the student aid, and most college students can qualify for as much money as they need to cover tuition — regardless of the price tag or personal credit rating. These taxpayer-funded loans are given at artificially fixed interest rates and without regard to the earning potential of secondary education. This system allows colleges to increase tuition every year with impunity because whatever they charge, students can fund it with government money.
Worse, both the pauses and a possible full bailout will not only be subsidized by all of our taxpayers’ money, but will impose a different kind of burden on us: more inflation. The unemployed are paying for this massive bailout, while those who have had their five- or six-figure debts written off would spend artificially printed dollars. If you find you can’t afford the same amount of groceries for your family as you could a year ago or can’t afford to fill up your gas tank, remember every step that brought us here. Democrats want to bend the federal government for the wealthy and demand you foot the bill.
Kristin Tate is a visiting fellow at the Independent Women’s Voice and a libertarian writer. Her latest book is “how do i tax you A field guide to the Great American Rip-Off.‘ Follow her on Twitter @KristinBTate.