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On Wednesday, President Biden announced a debt forgiveness plan that has driven some people into meltdowns. Some critics say that it doesn’t do enough and are pushing for universal cancellation, but others are claiming it does far too much or is fundamentally unfair because they already paid off their loans.
The policy proposals are relatively simple ones that begin, unfortunately, with a means test—only individuals who make less than $125,000 or couples making up to $250,000 qualify. From there, we have three main policies: up to $10,000 forgiven per borrower, and up to $20,000 per borrower for Pell Grant recipients; an extension of the student loan repayment pause until January 2023; and a change to the income-driven repayment plan that would cut monthly payments from ten to five percent of a borrower's discretionary income, and prevent interest from accumulating so long as monthly payments are made.If the most strident critics of the plan are to be believed, then this amounts to a massive wealth transfer from downtrodden working class people to coastal elites with fancy degrees. The reality is quite different: 53 percent of borrowers owe less than $20,000 and typically have a harder time paying back their balances because they didn’t finish school. The White House estimates this will provide relief for up to 43 million borrowers, cancel debt entirely for about 20 million borrowers, and the relief will mainly go to low- and middle- income borrowers (about 90 percent to those making less than $75,000).
Online, there’s been a great deal of celebration that is heart-warming to read."If all of this comes to pass, it will be the single greatest [quality of life] improvement in my entire adult life, by far. Here's to hoping," wrote one redditor on the StudentLoans subreddit said in a megathread on the announcement. "I just want to cry!! I got the max Pell grant every semester because I was forced to be the breadwinner and my parents didn't work. This will pay my undergraduate loans and then I can pay my graduate loans out of pocket," another Redditor shared. "I know that $20,000 is a drop in the bucket for many, but this is a god send for me. I’ve been carrying this debt since 2008 and the recession was hell on my family. Every single member was laid off, except for my mom, who was a social worker. It’s going to mean an extra $150 in my pocket every month, plus the sheer relief of having that debt just be GONE. I truly hope those with higher loads can appreciate the gift they were given today. $20,000 is a lot of money no matter how you look at it,” said another Redditor.
You can read comments like this all day (and you should). Still, there is criticism of the plan coming from both sides of the political spectrum. On the left, the criticism is that the plan doesn’t do enough. Calls for more forgiveness for student debt (or all debt) are rooted in the concern that the Biden plan still leaves tens of millions of Americans with crushing debt. Full debt cancellation would help non-white students who leave school with higher debt burdens than their peers, and also are less likely to have families that can facilitate wealth transfers to help pay down debt or invest in some asset that gains value (e.g. a home). So while these reforms are huge material improvements for nearly half of all American student debt holders, that burden is still an odious one that no one should suffer—especially true when it disproportionately falls on Black and brown borrowers. “This is a stepping stone, not the destination. A President who wanted to do NOTHING had to do something,” tweeted Astra Taylor, a co-founder of the Strike Debt collective. “Up to 20 million people could be debt free. Hopefully some of them will join the fight for everyone else.”
Others—ranging from liberals and centrists to conservatives and right-wing reactionaries—are making unsound or ridiculous arguments in their criticisms that the plan does too much. Rep. Jim Banks (R-IN) even argued that forgiving student debt would undercut the U.S. military's recruiting strategy; an unintentionally dire admission that the military relies on the threat of lifelong debt to attract poor people to become soldiers. Probably the loudest among this group is Jason Furman, a shopping mall real estate tycoon heir, professor at Harvard, and former chair of Obama's Council of Economic Advisers. Furman has been a loud critic of every progressive policy you can imagine, but over the past year debt forgiveness has risen to become one of his favorite bugbears. “Pouring roughly half trillion dollars of gasoline on the inflationary fire that is already burning is reckless. Doing it while going well beyond one campaign promise ($10K of student loan relief) and breaking another (all proposals paid for) is even worse,” Furman tweeted on Wednesday after Biden revealed the student debt forgiveness plan. Furman also affirmed an analysis from the Committee for a Responsible Federal Budget which asserted that Biden's student debt forgiveness program would wipe out fiscal and inflationary gains from the recently-signed Inflation Reduction Act.Goldman Sachs, (not exactly known as being a leftist agitator), doesn't seem to agree. A report issued by Joseph Briggs and Alec Phillips, two economists at the financial firm, makes it abundantly clear that the math doesn’t support arguments about student debt relief having inflationary effects.“The aggregate effects from such an income boost would be small, however, with the level of GDP increasing by about 0.1% in 2023 with smaller effects in subsequent years. We would expect the effects on inflation to be similarly small," Briggs and Phillips write. “However, the end of the payment pause and the resumption of monthly payments looks likely to more than fully offset the small boost to consumption from the debt relief program.”It’s unlikely this will silence Furman and others who echo these talking points. Ultimately, though, those saying the plan does too much should be ignored for a multitude of reasons. The plan will help people—tens of millions of people, in fact. It will absolutely change lives. That’s good, and there’s nothing real estate heirs and policy wonks say to dispute that. But if we helped everyone and fully canceled student debt? Or if we changed the higher education system in America so that going to school doesn't require taking on huge amounts of debt in the first place? Well, that would be even better.