"While some may view this debt forgiveness as a slap in the face to people who were responsible and paid off their student loans, this is a bigger slap in the face to those Americans who never went to college," Will Bach, a financial advisor based in Ohio, told Yahoo Finance.
Research has shown that a college degree generally boosts an individual's earnings over their lifetime. And given that any broad-based forgiveness would cost tens of billions of dollars, all taxpayers — not just by those who have a college degree — would be contributing to the cost of cancellation.
"How can we honestly ask people who did not go to college to subsidize the lives of those who did decide to go to college?" Bach added. "To my knowledge, everyone with student loans voluntarily took them. Every instance of a student loan was a voluntary choice that person made."
Some right-leaning academics, including Andrew Gillen of the Texas Public Policy Foundation, argue that there are a variety of problems with cancelling student loan debt. These include the overall cost and the fact that forgiveness does not directly address the core issue of rising college costs.
Cancelling $10,000 or $50,000 across the board is "really badly targeted," Gillen said in an interview with Yahoo Finance.
"There there are people who are struggling to repay their debt, and we've got an existing set of solutions — and those solutions aren't working," he acknowledged, such as the massive failure of the income-driven repayment system. At the same time, he added, any broad-based forgiveness would be like saying that "a handful of people that are struggling here, [so] let's get rid of the debt for everybody."
An income cap on who qualified for any loan forgiveness would be a "no brainer," Gillen added, because it would help target the relief towards lower-income struggling debtors.
Biden is reportedly considering capping forgiveness to those who earned less than $125,000 or $150,000 as individual filers the previous year, The Washington Post reported recently. For couples filing jointly, the cap would be around $250,000 or $300,000.
President Joe Biden during a meeting with Agency Inspectors General in the State Dining Room of The White House on Friday April 29, 2022. (Photo by Demetrius Freeman/The Washington Post via Getty Images) ·The Washington Post via Getty Images
"The other thing that would also be a no-brainer is having different criteria for graduate loans than you do for undergraduate loans," Gillen said, "because we really do restrict how much you can borrow at the undergraduate level ... whereas at graduate level, because those students can borrow virtually without limit."
The proposal "is nothing more than a welfare program for the upper class," Bach said. "The people who have responsibly saved and paid for college will not benefit from this at all."
Bach, who worked as a police officer for five years after college, added that he took on student loans to pay for his MBA in finance and paid it off within a few years of graduating. He currently is a certified financial planner and financial adviser.
Critics ignore the privilege that allowed them to be debt-free: academic
Advocates pushed back against critics of Biden's plans to cancel debt.
“I'm sorry we weren’t able to win cancel student debt sooner," Melissa Byrne, a political organizer and an activist pushing for student debt cancellation, told Yahoo Finance. "I'm sorry that political operatives in the '70s and the '80s caved to Ronald Reagan and let folks defund higher education. ... But I'm not sorry we’re about to hopefully get a win now."
Louise Seamster, a sociologist at the University of Iowa, told Yahoo Finance that the group pushing back against cancellation is not a large one and asked them to put themselves in student debtors' shoes.
"As a sociologist, my work involves teaching students to consider how their own experiences are shaped by larger forces," Seamster said in an email to Yahoo Finance. "As such, I would encourage people who have been lucky enough to pay down their debt to reflect on what factors allowed them to pay down their debt: maybe attending school when public education was actually affordable; the support of a partner or family; or graduating into a favorable economy."
She added that critics "might have made career choices that prioritized income, but I hope they think what our society would look like if everyone had made those same choices and who would be educating their children or providing them medical care."
Some studies have shown that women and people of color take on more debt to go to college compared to their white male peers. Rep. Ayanna Pressley (D-MA) has repeatedly argued that student loan forgiveness is "a matter of racial and economic justice" given the disproportionate burden on borrowers of color.
"Canceling student debt is one of the most powerful ways to address racial and economic equity issues," a recent letter from prominent Democrats, including Pressley, asserted to the president. "The student loan system mirrors many of the inequalities that plague American society and widens the racial wealth gap. Black students in particular borrow more to attend college, borrow more often while they are in school, and have a harder time paying their debt off than their white peers."
U.S. Representative Ayanna Pressley (D-MA) on Capitol Hill in Washington, U.S., December 8, 2021. REUTERS/Elizabeth Frantz ·Elizabeth Frantz / reuters
Seamster added that if Americans still feel like cancellation of debt is unfair, "I invite them to join the movement for free college to make the same public higher education benefits available to all and make student debt itself unnecessary."
Bach said he doubted that forgiving debt would help the economy, and that it was an opportunity for Democrats to gain clout with voters.
"I don't think there is any evidence that this is going to help with the U.S. economy or student debt holders," he said. "This is simply a Hail Mary for President Biden who has just hit a 40% approval rating with the younger population."
The political benefit seems to be one thing both sides agree on: In a recent interview with Yahoo Finance, Pressley stated that "Democrats win when we deliver, and we have to deliver in ways that are impactful, tangible and transformative, like canceling student debt. This is good policy. And it is also good politics."
Aarthi is a reporter for Yahoo Finance. She can be reached at aarthi@yahoofinance.com. Follow her on Twitter @aarthiswami.
