Student Debt Cancellation Isn’t About Economics—It’s About Ideology

CommentaryIs there more behind President Joe Biden’s decision to extend the student debt moratorium than votes in November? Yes, of course. Biden’s extension of the moratorium on student debt repayments is a thinly veiled ploy to win Democratic favor with young voters in the lead-up to November’s midterms. The president’s approval rating with voters aged 18 to 34 currently stands at an abysmal 40 percent. The total amount of outstanding student loan debt in 2021 was a whopping $1.75 trillion, with 43 percent of college attendees taking on debt for an average amount of about $41,000 per borrower. Those between the ages of 25 and 34 accounted for over $500 billion of that total. Kicking the student debt can down the road is an easy option to try and boost Biden’s numbers among this heavily indebted demographic, all in the hopes of getting them to the polls in November (and in 2024). It also carries the added benefit of avoiding any short-term political hurdles presented by enacting a more permanent cancellation plan (although the administration has recently announced new strategies for totally absolving student debt). But don’t let the clear electoral motivation behind this move excuse the fact that Biden has proven himself a reliable puppet of the progressive wing of his party. Debt cancellation is not only an attempt to salvage his failing agenda and gain some easy votes. Rather, it is indicative that he is largely beholden to the increasingly far-left Democratic base in general. Biden originally called for forgiveness of up to $10,000 in student loans for each individual. This number hardly kept pace with progressive champions of the party like Bernie Sanders and Elizabeth Warren. One of Sanders’ campaign slogans on his website is “College for All and Cancel All Student Debt.” Warren proudly boasts the headliner “My Plan to Cancel Student Loan Debt on Day One of My Presidency.” For his justification, Biden has announced that the extension of the current moratorium is due to the fact that “if loan payments were to resume on schedule in May, analysis of recent data from the Federal Reserve suggests that millions of student loan borrowers would face significant economic hardship.” It’s no secret that issues tied to race, gender, and sexuality are the modern American left’s favorite issues to rally around. But as the country struggles with historic levels of inflation, it’s important to assess how the actual situation stacks up against the reasoning provided by the Biden administration and left-wing Democrats. So what do the numbers actually say about it? Consider the purported focus of all three—Biden, Sanders, and Warren—on easing the plight of the economically marginalized. A 2020 study by Brookings Institution—hardly a non-governmental organization that is unfriendly to the progressive agenda—states that 40 percent of households (those with incomes above $74,000) owe almost 60 percent of the outstanding education debt and make nearly three-quarters of the payments. Graduating students pose for a class picture at the University of California Los Angeles (UCLA), in Los Angeles, Calif., on June 14, 2019. (Robyn Beck/AFP via Getty Images) On top of that, while a bachelor’s degree can help boost an individual’s long-term economic prospects, higher degrees than that have an exponentially lower impact on future earning potential. In 2019, 56 percent of student debt was held by those holding an educational level of a master’s or higher (such as a professional or doctoral degree). Yet those with a master’s degree are only 14 percent of the over 25 population, while only 3 percent of the latter demographic hold a professional or doctoral degree. As stated by the report, “the data show that students who go to college and particularly graduate school tend to earn more and are more financially secure, which is why student debt is nevertheless so concentrated among well-educated and higher-income households.” So would debt relief really be effective in relieving the economic burdens of the least well off? Hardly. Then some argue that debt cancellation would act as a stimulus to the U.S. economy, similar to the impact of massive tax cuts. Moody’s Investors Service makes this case; however, it warns that the stimulus would only be modest considering that loan payments are usually a relatively smaller share of monthly expenses. Instead, this would actually create a “moral hazard” as individuals feel less inhibition to accumulate even higher debt levels. This makes sense. The claim that freed up capital would lead to more investment in small businesses and increased homeownership is a terrifying prospect to those who understand the law of incentives. Setting a standard in which the government swoops in to relieve the individual of all financial accountability does not inspire confidence that small business loans or mortgages will be given due priority, especially if they are only being sought out because of

Student Debt Cancellation Isn’t About Economics—It’s About Ideology

Commentary

Is there more behind President Joe Biden’s decision to extend the student debt moratorium than votes in November?

Yes, of course. Biden’s extension of the moratorium on student debt repayments is a thinly veiled ploy to win Democratic favor with young voters in the lead-up to November’s midterms.

The president’s approval rating with voters aged 18 to 34 currently stands at an abysmal 40 percent. The total amount of outstanding student loan debt in 2021 was a whopping $1.75 trillion, with 43 percent of college attendees taking on debt for an average amount of about $41,000 per borrower. Those between the ages of 25 and 34 accounted for over $500 billion of that total.

Kicking the student debt can down the road is an easy option to try and boost Biden’s numbers among this heavily indebted demographic, all in the hopes of getting them to the polls in November (and in 2024). It also carries the added benefit of avoiding any short-term political hurdles presented by enacting a more permanent cancellation plan (although the administration has recently announced new strategies for totally absolving student debt).

But don’t let the clear electoral motivation behind this move excuse the fact that Biden has proven himself a reliable puppet of the progressive wing of his party. Debt cancellation is not only an attempt to salvage his failing agenda and gain some easy votes. Rather, it is indicative that he is largely beholden to the increasingly far-left Democratic base in general.

Biden originally called for forgiveness of up to $10,000 in student loans for each individual. This number hardly kept pace with progressive champions of the party like Bernie Sanders and Elizabeth Warren. One of Sanders’ campaign slogans on his website is “College for All and Cancel All Student Debt.” Warren proudly boasts the headliner “My Plan to Cancel Student Loan Debt on Day One of My Presidency.”

For his justification, Biden has announced that the extension of the current moratorium is due to the fact that “if loan payments were to resume on schedule in May, analysis of recent data from the Federal Reserve suggests that millions of student loan borrowers would face significant economic hardship.”

It’s no secret that issues tied to race, gender, and sexuality are the modern American left’s favorite issues to rally around. But as the country struggles with historic levels of inflation, it’s important to assess how the actual situation stacks up against the reasoning provided by the Biden administration and left-wing Democrats.

So what do the numbers actually say about it?

Consider the purported focus of all three—Biden, Sanders, and Warren—on easing the plight of the economically marginalized. A 2020 study by Brookings Institution—hardly a non-governmental organization that is unfriendly to the progressive agenda—states that 40 percent of households (those with incomes above $74,000) owe almost 60 percent of the outstanding education debt and make nearly three-quarters of the payments.

Epoch Times Photo
Graduating students pose for a class picture at the University of California Los Angeles (UCLA), in Los Angeles, Calif., on June 14, 2019. (Robyn Beck/AFP via Getty Images)

On top of that, while a bachelor’s degree can help boost an individual’s long-term economic prospects, higher degrees than that have an exponentially lower impact on future earning potential. In 2019, 56 percent of student debt was held by those holding an educational level of a master’s or higher (such as a professional or doctoral degree). Yet those with a master’s degree are only 14 percent of the over 25 population, while only 3 percent of the latter demographic hold a professional or doctoral degree.

As stated by the report, “the data show that students who go to college and particularly graduate school tend to earn more and are more financially secure, which is why student debt is nevertheless so concentrated among well-educated and higher-income households.”

So would debt relief really be effective in relieving the economic burdens of the least well off? Hardly.

Then some argue that debt cancellation would act as a stimulus to the U.S. economy, similar to the impact of massive tax cuts. Moody’s Investors Service makes this case; however, it warns that the stimulus would only be modest considering that loan payments are usually a relatively smaller share of monthly expenses. Instead, this would actually create a “moral hazard” as individuals feel less inhibition to accumulate even higher debt levels.

This makes sense. The claim that freed up capital would lead to more investment in small businesses and increased homeownership is a terrifying prospect to those who understand the law of incentives. Setting a standard in which the government swoops in to relieve the individual of all financial accountability does not inspire confidence that small business loans or mortgages will be given due priority, especially if they are only being sought out because of the cancellation of existing debt.

All of this is in reference to policy in the aggregate. Sure, some will benefit from student loan forgiveness as a second lease on making wise financial decisions. But this also leads to the fundamental reality that the system as it currently exists is failing.

The U.S. government backs 92 percent of student loan debt. Eighteen-year-old individuals are often convinced to take on massive levels of debt without the ability to understand the lasting financial consequences for their future or because they have been told it is their only option for a lucrative career. This essentially makes them debt slaves to the Washington bureaucracy while simultaneously inflating the cost of university ever higher. Many will finish school with degrees that have a paltry return on investment.

This says nothing of the fact that the university system has essentially transformed into an indoctrination mill for anti-American sentiment and feelings of victimhood (in other words, a conveyor belt for entitled 20-something-year-olds who may or may not even hold any applicable skills for a given job market).

The answer is not to necessarily cancel student debt or make college free, but to begin encouraging America’s youth to consider different options such as trade schools, apprenticeships, and entrepreneurship. This is clearly a cursory view on the subject, as volumes could be written on the topic of viable alternatives to the failing U.S. educational system.

Sanders does include free trade schools in his program. This is praiseworthy but ignores the fact that his program was estimated to cost $75 billion a year ($47 billion from the federal government and the rest from states), according to his own 2016 presidential campaign.

Although many on the left take little heed of what government spending does to a nation’s economy, the massive cost of straight-up canceling student debt would be sure to send inflation through the roof. Higher levels of inflation disparately impact lower-income households, the exact type of communities that socialists purport to fight for. This is especially true as commodity prices skyrocket.

So what really lies behind the push for student debt cancellation and free college for all?

The answer lies in a more fundamental truth of the American left, which conservative pundits speculating on this issue have either missed or are just too shy to admit. It makes no difference whether those who own the majority of the country’s debt are actually able to repay it, either through their own means or the means of their largely middle-class families. The movement is based on ideology, and that ideology is the exact result of the very universities that saddle their attendees with these massive financial burdens and teach them to detest their country and reject all traditions.

Epoch Times Photo
Activists call on President Joe Biden to not resume student loan payments in February and to cancel student debt near the White House in Washington on Dec. 15, 2021. (Paul Morigi/Getty Images for We, The 45 Million)

“Cancel student debt” was destined to evolve from an implausible ultra-liberal mantra into a central policy issue of the Democratic base. Much like identifying as a “socialist” has transitioned from a political taboo into a point of progressive pride, the more extreme views of the far-left have inevitably leaked down into the soft and malleable party center.

This isn’t a conspiracy or a secret. Many who currently identify with the Democratic base—especially in the younger, advanced degree-holding demographic—will likely be glad to agree with this evaluation. There is less and less reserve over openly celebrating their desire for fundamental institutional change, a total break from the archaic political past and the anachronistic American founding. Calls for entirely scrapping the U.S. Constitution and starting from scratch, once anathema in the political and public sphere, are increasingly common.

During the 2020 presidential election, Biden tried his best to create the illusion that he was a middle-of-the-road political candidate. He tried to appear moderate in a field of radicals; however, he has proven over his half-century in Washington that his convictions blow freely with the political weathervane. It seems that the only true principle he has operated according to has been the acquirement and retention of power.

This principle has, is now, and will continue to guide him further to the left.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.


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Dominick Sansone is a regular contributor to The Epoch Times. He focuses on Russia-China relations and U.S. foreign policy.