One of the major policies progressive Democrats have been advocating for is student loan forgiveness for college debt. While some like Sens Elizabeth Warren and Charles ‘Chuck’ Schumer are requesting $50,000 in loan forgiveness for borrowers, President-elect Joe Biden proposed $10,000 in loan forgiveness for households making $125,000 or less.
However, a recent op-ed by the Editorial Board at The Washington Post has advocated against a universally blanketed approach to student loan forgiveness.
Here are 3 things to know about how the Post says an all lives matter debt relief program will help higher-income Americans and deepen inequality.
According to an analysis by university scholars Sylvain Catherine and Constantine Yannelis, debt relief programs are “highly regressive.”
“They find that debt forgiveness plans, whether universal or capped at $50,000 as Mr. Schumer and Ms. Warren propose, ‘are highly regressive, with the vast majority of benefits accruing to high-income individuals.’ Even a plan capped at $10,000 would disproportionately favor upper-income Americans,” the Post reported.
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Although Black borrowers have significantly higher student loan balances than their white counterparts, the analysis said college debt forgiveness won’t help close the wealth gap much.
“While debt forgiveness would indeed improve the net worth of individual Black borrowers significantly, the benefits to White borrowers offset this, arguably exacerbating the wealth gap,” according to the Post’s summary of the analysis A $50,000-per-household plan, for example, would confer 70 percent of benefits on White borrowers and 20 percent on Black borrowers.”
While the analysis highlights the pitfalls of loan forgiveness based on the scholar’s research, it also highlights ways to help Americans with student loan debt. According to the Post, income based repayment is the best solution.
The Post wrote, “a seemingly modest change the analysis considered would have the most progressive impact, including in terms of the racial wealth gap: making sure that everyone who qualifies enrolls in an existing plan that links debt repayment to a borrower’s income. Such plans, the study concludes, ‘are a useful tool for targeted loan forgiveness, and the benefits of this forgiveness largely accrue to middle-income individuals.’”
