The False Arguments Against Student Debt Relief
The deficit hawks were attack the idea of student debt relief using straw men and misleading data. Offenders understand Brookings Institution, Goldman Sachs, and Pete Peterson’s Committee for a Responsible Federal Budget.
Here are their main arguments: First, a lot of student debt is held by relatively affluent people and senior graduates, and so student debt relief is distributionally bad. Second, the macroeconomic stimulus would be weak relative to other possible uses of money.
But it’s easy to target relief away from the rich and to those who really need it, capping the amount of relief.
Even the Committee for a Responsible Federal Budget – the ultimate deficit hawks – admits that about half of total debt is held by households earning less than the median income. Thus, capping the total amount of relief can target it where it is needed.
Elizabeth Warren and Chuck Schumer have proposed a debt relief ceiling of $ 50,000. A Brandeis study found that the capping of relief as proposed by Schumer and Warren would target most of it on households below the median income, and that the total forgiveness rate would be 87% for those with a d associate, 72% for those with a bachelor’s degree, but only 28% for those with doctorate, law or medicine degrees.
The stimulus argument is a straw man. Debt relief is not a substitute for a massive program of COVID relief and infrastructure spending. But these require legislation, which is not on the table, while Biden can alleviate debt through executive action. It is particularly infuriating to hear these straw man arguments from the Responsible Budgeting Committee, which exists to cut social spending, and Goldman Sachs.
And all of these deficit studies are based on the Fed’s survey of consumer finances. But this survey determines household income by examining the main breadwinner—and miss the millions of recent graduates struggling with large debts who had to move in with their parents. It therefore fails to capture the hundreds of billions of debts held by millions of financially strapped people, and completely cooks the numbers.
The reason for the debt relief is not because we expect it to be a massive macroeconomic stimulus, but because student debt is hampering young Americans who have not. of rich parents even before the start of their economic life. Debt has particularly hurt black and Latin American students, those who have gone to community college or been duped by for-profit colleges and are now heavily in debt relative to their income.
It’s time for Biden to use his executive power to help millions of struggling young adults.