Senate Democrats Want Biden To Unilaterally Forgive Billions of Dollars in Student Loans
With Democrats staring down the possibility of Republicans maintaining control of the Senate, Sen. Elizabeth Warren (D–Mass.) and 12 other Democratic Senators want President-elect Joe Biden to forgive hundreds of billions of dollars in student loan debt by using the Education Department’s power “to modify, compromise, waive, or release student loans.”
Warren promised during her own presidential campaign that she would, if elected, “direct the Secretary of Education to use their authority to begin to compromise and modify federal student loans consistent with my plan to cancel up to $50,000 in debt for 95% of student loan borrowers (about 42 million people).” It appears she’d like Biden to do the same.
This would be quite a gift for many student loan borrowers who still have outstanding balances (myself included). As the Manhattan Institute’s Beth Akers noted last year, the typical four-year college graduate completes their degree with less than $30,000 in student loan debt. Meanwhile, the College Board’s most recent effort to calculate the lifetime earnings premium of a college degree finds that the average four-year degree holder makes $400,000 more over their working lifetime than someone with just a high school diploma. In 2015, researchers Christopher R. Tamborini, ChangHwan Kim, and Arthur Sakamoto published a paper in Demography that measured the 50-year lifetime earnings gap between high school graduates and bachelor’s degree holders at $896,000 for men and $630,000 for women. In 2011, Georgetown University’s Center on Education and the Workforce pegged the B.A. earnings premium at $964,000. Whether the premium is shrinking or we’re just getting better at measuring it—or some combination of both—it’s still a good return on what comes out to roughly $7,000 in interest for borrowers who repay the average-sized loan in the standard 10-year timeframe.
As I outlined in a feature earlier this year, many student loan borrowers do not feel like they’re getting a good deal. That’s because while federally issued and guaranteed loans have made it possible for the poorest Americans to attain education, those subsidies have also driven up the cost of education at a rate multiple times higher than inflation. It is also now quite clear that making student loan debt easy to accumulate but nearly impossible to discharge in bankruptcy (which I also cover in the above-linked feature) has helped millions of students get ahead while enabling a smaller (but still large) number of students to borrow money they can’t repay in order to purchase degree programs they can’t complete, can’t utilize, or can’t recognize as crap.
A Democratic administration is
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