On Wednesday, President Biden revealed details of an executive order that will cancel $10,000 of student-loan debt per borrower for individuals earning up to $125,000 and married couples earning up to $250,000. A Penn-Wharton Budget Model released Tuesday found that “a one-time maximum debt forgiveness of $10,000 per borrower will cost around $300 billion for borrowers with incomes less than $125,000.” That provision alone translates to more than $2,000 per taxpayer. (Biden’s plan also provides $20,000 in student-loan cancellations for those who received Pell grants in college and caps monthly student-loan payments at five percent of monthly income.)
As Harvard’s Lawrence Summers, who served as President Clinton’s Treasury secretary and President Obama’s top economic adviser, wrote on Twitter on Monday:
Every dollar spent on student loan relief is a dollar that could have gone to support those who don’t get the opportunity to go to college. … Student loan debt relief is spending that raises demand and increases inflation. It consumes resources that could be better used helping those who did not, for whatever reason, have the chance to attend college. It will also tend to be inflationary by raising tuitions.
Summers added: “The worst idea would be a continuation of the current moratorium that benefits among others highly paid surgeons, lawyers and investment bankers.” Biden’s plan includes an extension of the current moratorium until (at least) December 31, 2022.
Last year, House Speaker Nancy Pelosi said that the president has no legal authority to cancel student debt and that such a plan could only be legally carried out by an act of Congress:
>> @SpeakerPelosi says Biden does *not* have the power to cancel student loan debt — as some Democrats, led by @SenSchumer, are urging him to do.
"That has to be an act of Congress," Pelosi says. pic.twitter.com/2V7ALDDG3y
— Michael Stratford (@mstratford) July 28, 2021
On Wednesday, Senate Republicans condemned Biden’s plan for effectively taking from working-class Americans to pay off the debts of white-collar college graduates (who have not yet paid back their loans):
President Biden didn’t "forgive student debt," he chose to shift the burden of the well-off onto the backs of the 87 percent of Americans who chose to not go to college, already paid off their loans, or saved to not take them out in the first place.
— U.S. Senator Bill Cassidy, M.D. (@SenBillCassidy) August 24, 2022
My mom didn't go to college. She worked two jobs to keep the lights on & provide for my brother & me.
President Biden wants Frances Scott & millions of other Americans to pick up the student loan bill for the wealthiest among us who carry the majority of the debt. That’s wrong.— Tim Scott (@SenatorTimScott) August 24, 2022
Biden owes Americans an explanation on why a truck driver who didn't go to college is now responsible for the student loans of a rich lawyer.
— Tom Cotton (@TomCottonAR) August 24, 2022
Sad to see what’s being done to bribe the voters. Biden's student loan forgiveness plan may win Democrats some votes, but it fuels inflation, foots taxpayers with other people’s financial obligations, is unfair to those who paid their own way & creates irresponsible expectations.
— Senator Mitt Romney (@SenatorRomney) August 24, 2022
While Biden’s handout to college graduates with student loans is designed to boost Democratic turnout in November, it’s unclear how it will play politically. For example, in Wisconsin — the tipping-point state in the 2020 presidential election and home to a critical Senate race in 2022 — only about one-third of voters have a college degree, and only a fraction of those degree-holders still have student debt.