Last week four Republican lawmakers sent President Biden a letter explaining their opposition to any student loan forgiveness or cancellation for all.
The letter itself is insignificant. It is typical Washington D.C. political grandstanding. However, it contains many of the main talking points and political arguments in opposition to student loan cancellation.
Discussing the merits of the arguments against loan forgiveness is worthwhile.
Student Loan Cancellation is a Handout for the Wealthy
A common refrain from opponents of loan forgiveness is that it is a handout to wealthy people, like doctors and lawyers who borrowed student loans to pay for graduate school. The Congressmen argue that “[b]lanket forgiveness of student debt would provide the greatest benefits to the highest-earning individuals at the expense of these hardworking taxpayers.”
This is one of those arguments that sounds great as a sound bite, but it doesn’t hold up to any critical thought.
For starters, the wealthy don’t have student loans. They are wealthy. They have money to pay for school.
Additionally, the current proposals to forgive loans cap income at $125,000. Well-paid borrowers, such as doctors and lawyers, wouldn’t qualify for any help.
Carrying student debt is a bad financial decision if you can avoid it. The graduate student loan borrowers singled out by the Republican lawmakers usually pay interest rates between 6 and 8%. Anyone who can afford to eliminate this debt should do it immediately. It would be stupid to willingly pay 8% interest if you had money sitting in the bank earning less than 1%.
Finally, it is worth noting that the overwhelming majority of student loan borrowers are not wealthy individuals. Many of us are struggling to get by. If lawmakers focus on the possibility that some doctors might benefit, we ignore the millions who desperately need the help.
Editor’s Note: A large portion of the letter dealt with legal analysis on the President’s authority to cancel student debt through executive action.
Most Americans Don’t Benefit from Student Loan Forgiveness
The letter asks Biden to “think about the vast majority of Americans that do not hold a college degree.” In other words, loan cancellation doesn’t directly help most Americans.
This argument is wrong on two levels.
First of all, government spending doesn’t need to benefit all Americans directly. If the government passes a bill that directly helps 20% of the country, that is a good thing. The federal budget spends money on small businesses, hurricane relief, and disease research. Most of us are unlikely to benefit from these programs directly, but it is still money well spent.
Secondly, all Americans benefit when people go to college. The average college graduate provides a net benefit of $355,000 to the federal government. This benefit comes from paying higher taxes and reduced use of government relief programs.
What About Borrowers who Repaid Their Loans?
The letter calls loan forgiveness an “affront to the millions of borrowers who responsibly repaid their loan balances.”
It seems they are suggesting that forgiveness or cancellation isn’t fair to previous borrowers and families that repaid their debt.
If debt cancellation happened and some borrowers missed out because they had already repaid their loans, I would feel bad for them.
Some parents saved for many years to help their children pay for college. Some graduates kept a tight budget and paid off their debt through sacrifice and discipline. These people wouldn’t directly benefit from loan forgiveness. They might reasonably feel like they missed out.
However, this doesn’t justify not helping other borrowers.
What about the kids who didn’t have parents that saved for college? What about the borrowers who worked hard and sacrificed but still couldn’t repay their debt?
Imagine you hit a pothole driving through your town. You had to spend money repairing a flat tire and bent rim. Then the city council decides to fill the pothole so that others don’t face the same hardship. Would you oppose spending money so that others in your community don’t face the same problem?
It was a hardship for me, so it should be a hardship for you. The United States is in trouble if Americans behave this way.
Lawmakers are elected to fix problems, not to make sure that they impact all Americans equally.
Fixing Misconceptions About Student Loan Forgiveness
Letters like the ones that Congressional Republicans sent Biden are popular with many voters. They also can shape public opinion.
If enough Americans think that debt cancellation is a handout for the wealthy or unfair policy, it is less likely to happen.
However, as borrowers, we have the tools to make a difference. If you want to help, there are two ways you can directly contribute to the national discussion.
- Write to your elected representatives. Constiutent letters can make a difference. It tells elected officials where you stand and it shows a passion for the subject. If most Americans are either indifferent about forgiveness or passionaltely in favor, it is more likely to happen.
- Share your feelings on social media. Many Americans get their news and form their opinions based upon what they read on social media. If borrowers are vocal and passionate, it will change minds.