There are many relevant numbers when discussion turns to the $1.6 trillion in college student loan debt owed by 45 million people.
The numbers themselves are staggering. It is more debt than any other debt Americans hold with the exception of mortgage debt.
And there’s a number associated with President Joe Biden’s promise: “I’m going to make sure that everybody in this generation gets $10,000 knocked off of their student debt as we try to get out of this God-awful pandemic,” he said in a campaign speech in 2020 in Miami.
The Biden administration has been torn about the policy, some arguing the debt relief would be going to Harvard Law School graduates and other well off Americans. Lawyers within the administration believe the executive order may not be legal. The administration requested a legal analysis by the department, but it was heavily redacted when released.
Writing off $10,000 for student borrowers would cost about $321 billion, according to a study by the Federal Reserve Bank of New York.
That seems like a lot of money until we make relevant comparisons. The Trump tax cuts of 2017 cost $1.9 trillion. Sold as a way for business to access capital to invest in production and add jobs, the tax cuts fell far short as business had been sitting on $2.3 trillion in capital and didn’t really need the tax cuts. Instead, they boosted dividends to their wealthy investors.
Various analyses show the tax cuts never “paid for themselves” and actually added to the federal deficit.
The student loan write-off also pales in comparison to economic calamities like the savings and loan crisis which would cost $370 billion in today’s dollars and the financial bailout of 2008 which cost $498 billion ($678 billion in today’s dollars).
There are other good reasons for the modest write-off. Writing off $10,000 for every one would clear 10 million people from the backlog of student loan processing. The education department works with vendors to process the debt, but two of the eight vendors recently quit, leaving a backlog of processing that’s likely to take months.
Proponents of the debt forgiveness plan argue it would clear the rolls enough to reform how the debt is processed, which is a system that has long been criticized.
But in the end, students and families who struggled to pay unfair and skyrocketing costs of higher education deserve as much relief, if not more, than the bad actors who caused the financial crises or others who pocketed Uncle Sam’s cash as corporate dividends or tax cuts.
The $10,000 relief is not a tax cut, but it will boost the economy when students have a couple hundred extra dollars a month and can pay for private goods and services instead of paying the government.
Students, now highly educated workers, are the key to of our economic success and prosperity. A $10,000 package of debt relief is a small investment to make in America’s future.
We would urge the Biden administration and backers both Democratic and Republican to approve the student debt relief program.
— The Mankato Free Press