Liberal Student-Loan Forgiveness Plan is a Scam

 By Teri Christoph | December 29, 2020 | 9:49am EST

 

 

 

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My son started his senior year of high school this year in quarantine. 

Pre-pandemic, the school system struggled to prepare my special-needs son for the rigors of adult life. 

During quarantine, its failures are all the more magnified. 

Many parents, even before the pandemic began, would pay to supplement their children's education, and the government ensures the income of parents and guardians determines how much money a student can put toward college or university. 

The bottom line is that parents are deeply invested in their children's education, from grade school all the way through college or trade school—and government bureaucrats and their higher-education bedfellows take full advantage of that fact. 

Now, left-wing politicians are pushing presumptive President-elect Joe Biden to give borrowers up to $50,000 in federal student loan relief. 

Biden himself, during his presidential campaign,  proposed forgiving up to $10,000 in federal student loans. 

Both ideas may seem appealing but are ultimately bad for borrowers. 

Cancelling federal student loans would increase the cost of college tuition, offend those who've already worked hard to pay their loans, and punish those like my special-needs son who may focus on job-specific education.  

Experts from the Federal Reserve and Harvard estimate that the more the federal government subsidizes student loans the more colleges and universities increase the price of tuition, room and board. 

As Brigham Young University spokesperson Todd Hollingshead says of the study, "After controlling for every other factor that might have influenced tuition, the authors estimate institutions increased their sticker tuition about 60 cents for every additional dollar of subsidized loans made available to students." 

Throwing more "free" money into the mix would inevitably force the sticker price of tuition up at major colleges and universities nationwide. 

This will hurt middle-class students who gravitate toward smaller colleges and place a greater liability on taxpayers. 

Those like my special-needs son—for example—will be responsible for absorbing and repaying the debts of others, who are arguably more affluent and who don't have the same day-to-day challenges my son has. 

Proponents of debt relief argue it helps disadvantaged students, whether minorities, women, veterans or those from working-class backgrounds, afford college. 

Unfortunately, a close inspection of loan forgiveness shows that it limits opportunities for lower-income Americans while helping the wealthy. 

The bulk of relief from forgiving student loans flows upward to the affluent, not downward to those who need it most.

Recent reporting, by Josh Mitchell of the Wall Street Journal, illustrates the paradoxical nature of a program that supposedly helps the poor but aids the well-off. 

"Canceling all student debt would be akin to giving the top 10% of households by income $78 billion, or an average of $6,000 per household, while giving $12 billion to the bottom 10%, an average of $1,100 per household, according to research by economists at the University of Chicago."

Even left-leaning researchers at the Urban Institute found the lowest 25% of income earners would only see 12% of loan forgiveness benefits. Jason Furman, President Obama's chair of the Council of Economic Advisers, refutes claims that loan forgiveness would create an economic rebound, saying, "Student loan debt forgiveness likely has a multiplier close to zero."

Any small benefits disadvantaged students might obtain from loan forgiveness would be quickly canceled out by rising costs and limited options, as many schools would either have to raise tuition or close. 

Higher tuition and a contracting market will hurt lower-income students who won't have the guarantee of future loan forgiveness. 

If Democrats are serious about helping lower-income students succeed, they need to start supporting programs and career-oriented colleges that offer degrees in areas of our nation's workforce such as nursing, engineering, logistics, and technology. 

In many cases, these private, career-focused colleges lead the way through the use of online learning, flexible schedules, and degrees specifically tailored to help students find employment. 

Enacting loan forgiveness particularly harms these innovative schools who often are already swimming upstream against excessive and needless government regulation. 

Beneath all the rhetoric, student debt forgiveness functions as a handout for the wealthy while limiting opportunities for the disadvantaged. 

Hopefully, the Biden administration rejects this foolhardy proposal and focuses on providing more opportunities for needy students by helping private colleges.

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