Biden's student debt debacle

It's hard to top President Joe Biden's Afghan withdrawal for reckless policymaking, but his student-loan forgiveness scheme is a contender for his second-worst decision.

Based merely on his say-so, with no credible congressional authorization, Biden is going to forgive $10,000 in student debt for individuals with incomes below $125,000 or household incomes below $250,000. Those who received a Pell Grant are eligible for $20,000 in relief.

Forgiveness is a sop to a narrow class of people. It is unfair to people who haven't gone to college, predominantly lower income. It is unfair to people who did go to college and didn't take on loans. It is unfair to people -- not realizing that their loans might go away if they held out long enough -- who foolishly repaid their loans. It is unfair to people who will take a loan the day after the forgiveness goes into effect.

In short, the loan forgiveness is an arbitrary giveaway in a county where fewer than 40% of people have a four-year college degree.

If Biden were to explain the policy accurately in his characteristic fashion of resorting to folksy wisdom from his parents, he'd say something like: "My father told me when we were driving by commencement at the University of Pennsylvania one day -- 'Joey, be sure you're always thinking of the college-educated, including those with advanced degrees, first. They are the best among us.'"

The New York Times news story on the forgiveness features a young woman whose parents are immigrants from Mexico and went to community college for two years before transferring to UCLA. She's delighted that almost all her loans will be wiped out, but before your heartstrings can get pulled too much, the Times notes that she's currently getting a master's degree ... at the London School of Economics.

Presumably, she was going to be OK without getting showered with federal largesse denied to the children of immigrants who haven't gone to college, let alone pursued an advanced degree at one of the most prestigious institutions in the Western world.

Even if this young woman is poor now, it is doubtful that she'll be poor forever. As Brian Riedl of the Manhattan Institute notes, the typical millennial student with debt incurred $30,000 for a bachelor's degree. That's a lot, but the degree will boost incomes over a lifetime by $1-2.8 million.

Of course, there are low-income people who are struggling with their student debt. Even if you think they should get relief, the Biden policy doesn't narrowly target them. Former Obama economist Jason Furman points out that Biden's forgiveness could provide $40,000 in relief to a married couple making just under $250,000, and it includes debt incurred at graduate schools.

The fact is that the top 40% of the income distribution carries a bigger share of student debt than the bottom 40%.

There is all sorts of other debt Biden could theoretically forgive that is widely distributed up and down the income scale and is a burden to people, too, whether from auto loans or credit cards. Instead, student debt has been the obsession of Biden and his supporters. They deny it, of course, but their focus reflects a deeply held, profoundly insulting assumption that those who have earned university degrees are more valuable and worthy than all those Americans who haven't.

Then, there are the broader economic effects. Advocates of loan forgiveness used to argue that it would be stimulative, but in an inflationary environment, they aren't putting that argument front and center anymore. Biden's move will cost roughly $500 billion, and none of it is paid for, easily swamping the cuts to the deficit Democrats touted in their so-called Inflation Reduction Act.

The program is a debacle at every level and isn't product of a messy congressional compromise or unavoidable circumstances -- it's Biden's doing, and his alone.