“it would set a terrible precedent”
Katharine G. Abraham was an economic adviser for Obama. She wrote this essay for Politico with Michael R. Strain of the American Enterprise Institute:
Biden’s About to Make a Big Mistake on Student Loans
Blanket forgiveness of student loans, as President Joe Biden appears poised to offer, would be a huge mistake. It’s regressive and unfair. Over time, it could well increase the number of people struggling with student debt. And while billed as a “one time” policy, it would set a terrible precedent. This is not to say there aren’t student borrowers who need help. But there are better ways to support them than a giveaway that would primarily benefit well-off professionals.
The Biden administration is actively considering student loan forgiveness of $10,000 or more per borrower. This would be extremely regressive. Relatively few low-income households have student debt and, among those who do, outstanding loan balances are smaller than for higher-income borrowers. In part for these reasons, a recent study by economists Sylvain Catherine and Constantine Yannelis concludes that blanket forgiveness of $10,000 in debt would offer $3.60 to the highest-earning 10 percent of households for every $1 it gave to the bottom 10 percent and that three quarters of the benefits would flow to households with above-median incomes.
Putting an income cap on eligibility for loan forgiveness could make the policy less regressive. But the income limit the administration is eyeing — excluding only individuals making more than $150,000 per year — would have little bite because few people have incomes that high.
One of the bedrock principles of sound economic policy is that similarly situated people should be treated similarly. Student loan forgiveness would take a hatchet to this principle.
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