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Why is the U.S. administration trying to cancel so many Americans’ student debts? Ben Ritz on the policy merits and political calculations of an unusual government initiative.
Adam Nir
Adam Nir
As many as 43 million Americans could have their federal student-loan debt either reduced or forgiven entirely under a plan U.S. President Joe Biden announced last month. Following through on a 2020 campaign pledge, Biden is moving to cancel up to US$10,000 in debt for individuals earning less than $125,000 a year and couples earning less than $250,000. He says the policy will help “families who need it most—working and middle-class people hit especially hard during the pandemic,” and borrowers who received federal Pell Grants, typically given to low-income undergraduate students, will be eligible for an additional $10,000. Yet Biden’s plan, generally lauded by progressives, drew criticism from moderates in his party, including candidates running in swing states in this fall’s midterm elections. Ohio’s Democratic U.S. Senate nominee Tim Ryan said, “Waiving debt for those already on a trajectory to financial security sends the wrong message to millions of Ohioans without a degree working just as hard to make ends meet.” Meanwhile, Republicans and right-wing groups are not only opposed but going so far as to look for ways to challenge the policy’s legality. What does the Biden administration’s decision to move forward with the policy, despite these widespread reservations, indicate about the administration’s political priorities?
Ben Ritz directs the Center for Funding America’s Future at the Progressive Policy Institute, a center-left think tank based in Washington. In the months and weeks leading up to the announcement of broad student-loan forgiveness, Ritz urged the Biden administration against it. While it would give immediate benefits to some college-educated voters, notably a key Democratic Party constituency, it wouldn’t do anything, Ritz says, to address the underlying drivers of rising tuition costs. Meanwhile, it would risk further alienating the non–college-educated voters Democrats are struggling to attract. As Ritz sees it, the political rationale for the administration’s move is to mobilize young, student–debt-burdened Americans to vote in a midterm-election year that’s going to be challenging for the Democrats—which, to Ritz, is emblematic of the party’s struggle to extend its appeal beyond its existing electoral base. It also, he thinks, illustrates something important and less obvious about the administration’s approach to coalition politics: Where previous Democratic presidents, including Barack Obama and Bill Clinton, made tough choices about what to prioritize and who to disappoint—for the sake of building broader coalitions beyond their party—Biden’s tendency has been to try to give something to every significant constituency within his party. Two years into his term, it’s a question how sustainable this political pattern will be.
Graham Vyse: How does student-loan forgiveness relate to the Biden administration’s broader policy agenda?
Ben Ritz: Something this administration has been consistent about is its desire to give something to every part of the Democratic Party’s coalition. Where Barack Obama and other previous presidents set priorities—seeing themselves as having a limited amount of political capital and fiscal space to work with, or as needing to balance tradeoffs—the Biden administration has seemed to want to give everybody in their coalition what they were looking for. There’ve been voices on the left and in the center saying it would be better politics to do a few things well, as opposed to a bunch of things half-baked, yet the administration has persisted in its tendency.
Much of the agenda that it has framed as being about “cutting costs” for American families is really more about “covering costs.” Student-debt cancellation fits perfectly with this pattern. Rather than tackling the underlying drivers of skyrocketing tuition, Biden’s plan is simply to have taxpayers pay off the debts people take out to cover college. It’s very troubling, not least for progressives because this “covering costs” approach bloats the government in a way that’s corrosive to their agenda. The best way to show that the government can be trusted to do more is by doing a better job of what the government already does. That hasn’t been a priority under this administration—at least not as much of a priority as it was for Barack Obama’s or Bill Clinton’s.
Vyse: So, what was the political calculation here?
Ritz: College-educated Americans tend to be Democratic, especially in the age of Trump. They’re vocal on social media, work disproportionately as Democratic staffers, and play an outsized role in political debate within the party. This decision on student-loan forgiveness was a concession to them at the expense of people Democrats traditionally claim to champion.
It’s true that student-loan debt is top of mind for some young voters. In general, polling shows young voters are more concerned about the economy and inflation than about student-debt cancelation, but there’s no question the issue is more of a priority for them than for the U.S. population as a whole. The hope is that, if you give these voters $10,000 months before the midterms—or, in some cases, more than $20,000—they’ll get excited, knock on doors for Democratic candidates, donate money to Democrats, and show up to vote. It’s a strategy to energize the Democratic base.
Vyse: Naturally, Biden and his administration aren’t talking about this decision as a crass political maneuver, and advocates make the case for the decision on its merits. After all, some beneficiaries will be Americans who took out loans but didn’t finish college and get high-paying jobs—people who aren’t part of an economic elite. The White House says “no high-income individual or high-income household—in the top 5% of incomes—will benefit from this action.” What’s the best case you’ve heard for this policy?
Ritz: The best case I’ve heard for this policy is that some Americans are burdened by student debt but lack the income their educations were supposed to provide, which would have allowed them to pay off their debt. I think there’s a very clear argument for some form of debt relief for some people—and a very clear need to rein in the out-of-control costs of an American college education—but there’s a difference between reining in that cost and just throwing more taxpayer money at the problem.
Scott Webb
Scott Webb
More from Ben Ritz at The Signal:
This policy is really three policies in one: The first is a straightforward cancelation of $10,000 of debt. The second is the cancellation of an additional $10,000 of undergraduate debt for borrowers who were Pell Grant recipients. [Pell Grants from the U.S. government are typically given to undergraduates “who display exceptional financial need,” and these grants don’t usually require to be repayment.] Lastly, there are changes to income-driven repayment plans going forward. The first part—the cancelation of $10,000 in debt—disproportionately benefits higher-income people and people who will have higher incomes over the course of their lives.”
One of the main problems with this policy is that it’s not really targeted based on financial need. The administration says it is targeted, because relief is going to individuals who made less than $125,000 in 2020 or 2021—or couples that made less than $250,000—but a couple making nearly $250,000 a year has rather a high income to begin with, and many people made less money during the pandemic than they typically would have—for instance, a doctor who normally makes $300,000 but got his workload cut—so these people might be in a better financial situation overall than their 2020 income would indicate. Another issue is that people who’re still in medical school or law school—or are recent graduates—may have substantial debt right after graduation, but their degrees may significantly increase their earning potential over their lifetimes. So they’ll make much more than the average person, yet they’re still getting this debt cancelation.”
The average American has no student debt. More than four out of five American adults have no student debt. Among the groups of voters that Democrats have struggled to appeal to—swing voters, white working-class voters—the median voter has no student debt. Democrats are at risk of alienating a big part of the country by imposing costs on them and giving a benefit to the Democratic base. That alienation could grow, despite any initial euphoria among debt cancelation’s beneficiaries.”
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