of President Biden student loan cancellation plan has drawn mixed reactions since its announcement on August 24, although according to FiveThirtyEight, his polls rebounded. They stand at around 42% as of September 17, compared to 37.5% in mid-summer.
At first glance, eliminating up to $20,000 in federal student loans for millions of Americans may not seem like a political decision, but rather what is right.
“I understand that everything I announce today will not make everyone happy”, Biden said as he unveiled his plan. “But I believe my plan is responsible and fair.”
Spoken like a real politician. Biden ignores the fact that this decision does fundamentally nothing to keep rising tuition fees across the country at sustainable levels. When reviewing the data, the plan undermines its talking points on ‘Deficit reduction‘.
First the Committee for a Responsible Federal Budget (CRFB), a nonpartisan watchdog often cited by politicians of both parties, posed the simple question: How long will it take for canceled student debt to return? Approximately five and a half years, if all eligible borrowers receive debt forgiveness.
Even if all student debt is forgiven today – the level at which student borrowers currently owe about $1.6 trillion according to the BFRC — the committee notes that total US student borrower debt would return to these levels by the mid 2030s.
This is because debt cancellation is a regressive policy. It does nothing to reform the structural problems that drive colleges and universities to offload so many costs onto their students. It also allows for less accountability in schools.
For example, when many students inevitably default on their loans, why aren’t the universities they studied at obligated to get help paying back those loans at all? According US news and world reportwhich is often cited in educational reports and rankings, the endowments of some of the top universities are in the tens of billions of dollars.
In 2020, the Brookings Institution, a research group, studied the percentage of student borrowers who default on their loans. He revealed that the percentage of students who graduated from for-profit four-year schools and did not repay those student loans five years later was 41%. For two-year programs, it was 33%.
The data also shows that more than a quarter of community college borrowers, 14% of public school borrowers and 13% of private school borrowers will default, all over the same five-year period. These numbers may seem small, but with over 45 million borrowers in the United States, these fractions equate to millions of college students.
If college is an investment in students’ careers and knowledge, institutions should be held partially responsible when things don’t go as planned. Even the most skilled investors will take bets on companies that don’t do well. But when things go wrong, someone has to help foot the bill.
Administrative costs are also something that should be further investigated. Between 1980 and 2020, the collective costs of earning an undergraduate degree soared 169% according to a report by Georgetown University and quoted by CNBC.
But during this period, higher education saw the dawn of a swelling leadership. Daniel E. Chand, associate professor and coordinator of graduate studies in the Department of Political Science at Kent State University, writes about this in his editorial for The Despatch of Columbus.
“The entire nation operates under one vice president,” Chand said in the article. “But Kent State literally needs more than two dozen spread across many offices.”
Chand is not alone in his observation. Researchers at Journal of Higher Education Planning found that “post-secondary institutions in the United States spent $536 billion…however, in state or public schools, only 27% of that spending was used for educational purposes.” The Journal cited data from the National Center for Education Statistics for the 2014-2015 school year.
One can only imagine what that figure is today as the total amount of loans has increased.
In this same research, The Journal also states that “During the post-World War II era, the American Association of University Teachers (AAUP) advocated for shared governance among faculty and campus administrators through the bias of the faculty senate”.
Scholars describe this period as “a golden age for faculty, who were able to direct changes in campus operations and the academic mission, but their control began to erode as the number of administrators increased.
Essentially, the administrative burden in higher education is due to the over-management of each department, which most universities could do without.
In his article, Chand writes, “If you don’t believe me, try jumping through all the paperwork of ordering pizza from a local restaurant for an on-campus meeting, instead of paying for the contracted university catering service.” too expensive.
Last to go is Biden’s promotion of deficit reduction as part of the Democrats’ “Cut Inflation Act.” The bill’s total deficit reduction is $300 billion, according to data compiled by Senate Democratseven if some critics say the figure is more nuanced than it appears.
It will be short-lived, because the Penn-Wharton budget model – often cited by both Republicans and Democrats alike – estimates the total costs of the plan could top $1 trillion, wiping out any deficit reduction in the IRA. Rev up that money printer, President Powell!
Going back to Biden’s claims of being “accountable and fair,” the distinction is much less apparent when you put the issue into context. How responsible and fair is it to provide a momentary solution to a problem that will become equally evident in two presidential elections? Is it fair for students who will take out loans to start college in 2028? What about taxpayers who are now paying the bill for this regressive measure?
Serious steps can be taken to combat this problem, but for now, Biden’s plan will remain mere political posturing.