Is student loan cancellation progressive or regressive? It doesn’t really matter

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Ever since the Democrats pushed the idea in the 2019 primaries, the public has been considering the idea of ​​widespread student loan forgiveness. Now that President BidenJoe BidenSumer vows to develop a bilateral infrastructure development plan next month Biden appoints veterans of housing and banking regulator as acting head of FHFA Iran demands that the US lift all oil sanctions, but the State Department says “nothing has been agreed.” MORE again looks at debt cancellationpolicy experts engage in a parallel debate about whether student loan cancellation will be progressive or regressive, benefiting either the most economically needy or the already wealthy. But whatever you call it, complete student loan forgiveness overlooks a bigger problem: economic vulnerability.

BUT new report from the Roosevelt Institute tries to refute one of the most cited to investigate student loan forgiveness papers, which conclude that loan cancellation is regressive as it will primarily benefit high-paid professionals who take large loans to graduate. The Roosevelt report argues that the emphasis on income rather than wealth leads to misleading conclusions about how progressive these policies would be.

It is true that a newly minted doctor usually has both high salaries and a very poor condition. But where does this place them on the spectrum of economically vulnerable or not? Focusing on student loan debt and lack of wealth ignores the human capital that a person owns. This is because people with student debt have less wealth but much more potential for future income. Those with the potential to make a lot of money in their careers should not be considered economically vulnerable. The method used in the Roosevelt report is akin to measuring a person’s home equity by calculating the mortgage on his house as a liability, excluding the value of his house, which they could sell in the future to make a profit.

The reality is that many people with student debt, even with large sums, are not particularly economically vulnerable. This is because they have the skills and qualifications that lead to higher earnings than they might otherwise have received. Despite being more wealthy, lack of debt tends to put a non-college student in a more precarious financial position.

Common sense dictates that economically more vulnerable people need help from the federal government more than less vulnerable people. However, this mindset is absent from the current political debate.

Of course, not everyone falls into one of these categories. Some borrow but do not receive degrees, and some borrow to pay for advanced degrees that do not provide job opportunities that justify the cost. Fortunately, we already have a suite of programs called income related repayment – which protect borrowers in these circumstances from having to repay unbearable debts.

I am guilty of relying on the notion of regressiveness as an argument against canceling a student loan. When I raised it, my goal was to inform people that many high-paid people, who are more likely to prosper economically, will be the main beneficiaries. But I think we all benefit if we get rid of the jargon and argue seriously about who we want to be first in line for taxpayer-funded aid. For me, these are not those doctors and lawyers who start their professional lives in debt, but those who have no path to economic prosperity.

Instead of trying to get support for the abolition of student loans, Democrats should spend resources on anti-poverty programs or bolster existing borrower protections. Focusing on these policy reforms and initiatives rather than abolishing the student loan will benefit those who really need help.

Beth Akers – Research Fellow American Enterprise Institute… She is the author of the book “Making College Pay: An Economist Explains How to Make a Reasonable Bet on Higher Education… “



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