For the past few years, one of the main talking points against student-debt cancellation has been that it would disproportionately benefit the well-to-do. I’ve banged that drum myself.
But give Biden credit where it’s due: Per the new analysis from the Penn Wharton Budget Model that John McCormack noted here, Biden managed to tweak the idea so it shovels its free money first and foremost to the middle class instead.
The final plan differs in several ways from the more aggressive ideas floated by Elizabeth Warren and the like. There are limits of $10,000 or $20,000 of forgiveness, so no wiping out the six-figure debt from your lucrative advanced degree. Further, that extra $10,000 is only for those who received Pell Grants when they attended college; it’s a bit weird to give people extra money based on their parents’ finances (sometimes many years ago), but since these grants went to lower-income kids and there’s a correlation between parental and child income, this provision shifts the distribution of the relief downward a bit too.
There’s also an income cap of $125,000 ($250,000 for couples). This is insane as a cutoff for taxpayer largesse, at more than double the average earnings for full-time, year-round workers in this country. But it does keep out the very wealthiest.
Penn Wharton divides the population into “quintiles” of 20 percent of the population each. The poorest quintile receives only 14 percent of the relief. But the next quintile gets 23 percent, and the middle quintile gets a whopping 36 percent. The second-highest quintile gets 21 percent, and the richest 20 percent of the population get only about 6 percent: 5 percent for those between the 80th and 90th percentiles, 1 percent for those between the 90th and 95th.
I’m still not a fan for all sorts of reasons, and it remains fair to say that some very well-off people will benefit. (Up to $250,000 in household income!) But the final plan manages not to disproportionately give money to richer people. Give it that, I guess.