One of the most common arguments against student loan forgiveness is that it is a handout for the wealthy, and we shouldn’t be giving a bunch of money to Harvard and Yale grads. President Biden recently suggested that this was an issue in a town hall discussion.
On the surface, it is a compelling argument. Why should a blue-collar worker be paying off the debt of a bunch of rich doctors?
The facts tell a very different story. Regardless of how you feel about student loan forgiveness, you can’t reasonably argue that it is a handout for the rich and powerful.
Ivy League Schools Like Harvard and Yale are Usually Debt-Free
Many students who attend top private schools come from families that can just write a tuition check.
However, the elite students who don’t come from wealth won’t need student loans to pay for their education. At many top schools, students are given large grants and scholarships so that they do not need student loans. These schools use their large endowments to ensure that graduates do not enter the workforce with student debt hanging over their heads.
If you are working two jobs trying to get by, you don’t want your tax dollars paying for someone else to go to Harvard. Fortunately, you don’t have to worry about this particular concern.
Who Benefits from Student Loan Forgiveness?
A researcher from the University of Pennsylvania recently pointed out two crucial details about federal student debt in the United States.
- Families with student debt tend to have the least amount of wealth.
- The people really struggling with student debt have smaller balances, usually less than $10,000.
It isn’t a coincidence that President Biden is asking Congress to pass legislation for $10,000 of federal student loan forgiveness. This targeted amount would help many of the borrowers hit hardest by student loans.
It is estimated that $10,000 of forgiveness would wipe the balances of approximately 30% of federal student loan borrowers.
However, $10,000 isn’t the only forgiveness option being discussed.
$50,000 of Forgiveness Achieves Important Goals
Many Democrats, most notably Elizabeth Warran Chuck Schumer, are calling for $50,000 of student loan cancellation.
“$50,000 in forgiveness would clear debts for about 80% of borrowers, including more Black borrowers. Proponents argue that that would close wealth gaps and get at racial equity.”
The connection between student loan debt and wealth and racial equality is significant. Women make up 56% of college students but hold almost two-thirds of student debt. Black graduates have more debt than their white peers at graduation, and the gap widens with time.
The racial wealth gap is an issue that impacts all Americans. One study found that reducing the racial wealth gap could increase US GDP by 4 to 6%.
Student Loan Forgiveness for the Rich?
Pointing at Harvard and Yale grads or the super-rich as benefitting from student loan forgiveness is a great way to get people opposed to the measure.
The facts show that the people who will benefit most from debt cancellation are the ones who need it the most.
We can argue the merits of forgiveness and debate the best way to address the student loan crisis in the US, but let’s not waste time pretending this policy is a handout to the wealthy.