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President Biden’s student loan handout that Democrats are hoping will win over disenchanted young voters will benefit less than one-third of likely voters while shifting the debt burden to all taxpayers.
Biden announced Wednesday an executive order to cancel $10,000 for each student loan borrower, $20,000 for borrowers who received Pell Grants, and extend a repayment pause through Dec. 31.
The handout only applies to student loan borrowers earning less than $125,000 a year — $250,000 for married couples — and undergraduate borrowers can cap repayment at 5% of their monthly income, Biden said.
According to a fact sheet released by the White House, federal student loan debt has reached a staggering $1.6 trillion among more than 45 million borrowers.
President Biden announced that he was forgiving up to $20,000 in student loan debt, carrying a price tag of at least $300 billion. (Bonnie Cash/UPI/Bloomberg via Getty Images)
Meanwhile, there were roughly 158 million registered voters in the country in 2019, according to the IRS, so the handout can only benefit about 28% of those voters at the most. That’s given the assumption that all of those borrowers are also registered voters. Since that scenario is highly unlikely, Biden’s plan likely stands to benefit less than 28% of potential voters.
Meanwhile, taxpayers who may have never attended college will now have to foot the bill for students who took out loans, including law and medical students whose salaries typically start out small and then balloon over the course of their careers.
President Biden announces student loan relief with Education Secretary Miguel Cardona on Aug. 24, 2022, at the White House. (Olivier Douliery/AFP via Getty Images)
According to the Penn Wharton Budget Model, the handout will cost around $300 billion for taxpayers and will increase to around $330 billion if the program is continued over the standard 10-year budget window. Based on that model, the National Taxpayers Union estimates that the plan will cost the average taxpayer about $2,085.
Many experts have also been saying that the handout will incentivize colleges to raise tuition prices and cause students to overborrow.
President Biden waves after returning to the White House Wednesday to announce his student loan forgiveness plan. (AP Photo/Susan Walsh)
Former Barack Obama economic adviser Jason Furman went on a lengthy Twitter rant on Wednesday afternoon ripping the handout as "inflationary," "reckless" and government overreach.
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"Pouring roughly half trillion dollars of gasoline on the inflationary fire that is already burning is reckless," tweeted Furman, who served as chairman of the president’s Council of Economic Advisers during the Obama-Biden administration. "Doing it while going well beyond one campaign promise ($10K of student loan relief) and breaking another (all proposals paid for) is even worse."
"There are a number of other highly problematic impacts including encouraging higher tuition in the future, encouraging more borrowing, creating expectations of future debt forgiveness, and more," Furman said. "Most importantly, everyone else will pay for this either in the form of higher inflation or in higher taxes or lower benefits in the future."
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