The political cost of eliminating student debt

Forgiving most or all of the nearly $1.75 trillion in federal student loan debt is one of the boldest, and most expensive, proposals remaining on President Joe Biden’s domestic agenda. Given where Biden’s support came from in 2020, it is also the most politically risky.

In cementing the Democratic nomination for the presidency Joe Biden proposed forgiving “a minimum of $10,000/person of federal student loans, as proposed by Sen. [Elizabeth] Warren and colleagues.”  This was widely viewed as a way to offer something tangible to young voters, and that bet appeared to have paid off in the general election.

A Tufts University analysis of young voters 18-29 found that turnout was up 11 percent from 2016 to 2020 (39 percent to 50 percent). Importantly, the gap between those who voted for Biden and Trump was 25 percent nationally, and significant in key battleground states (+24 percent in Arizona, +18 percent in Georgia, +27 percent in Michigan, and +19 percent in Pennsylvania).

However, once he took office, President Biden didn’t move swiftly on cancelling debt. Instead, he paused federal student loan collections beginning in March 2020 and extended the policy through the end of August 2022. In the meantime, he has forgiven $16 billion in student debt for 680,000 borrowers, a relatively small group, under programs in place before he took office.

Still, nothing like that original promise to forgive debt has been delivered to date.

While President Biden’s job approval rating has cratered overall, according to recent Gallup polling, it’s comparatively even worse among Gen Z (-21 percent), Millennials (-19 percent), and even the relatively young Gen X voters (-15 percent), who presumably own much of this college debt.

If the President of the United States can do much of this alone, why hasn’t he done it? Three good reasons: inflation, cost, and culture.

Inflation — Since Biden took office, inflation has skyrocketed from hovering around 2 percent to 3 percent annually to over 8 percent, the highest since late 1981. Energy prices are significantly higher than average, some 25 percent from February 2021 to February 2022. Scrambling for a counter-message, President Biden has characterized rising energy prices as “Putin’s Price Hike” but it only covers four days since Russia invaded Ukraine on Feb. 24. 

Forgiving student debt would re-create an influx of cash into the economy like the American Rescue Plan, which contributed to inflation. It would undercut what the Federal Reserve is doing by increasing interest rates to lower money supply and get inflation back under control. Doing anything now risks making the top issue of high cost of living/inflation even worse, according to Gallup.

Cost — Even if inflation were under control, the sheer cost of forgiving all federal student loan debt is politically unworkable. Biden’s Build Back Better plan remains blocked by members of his own party and its cost was $750 billion over the next five years, a cool trillion less than taking federal debt off the books. Even if Biden gets the price tag down the $10,000 he promised for each of the estimated 46 million borrowers, that’s $460 billion on one program. Even in Washington, that’s real money.

Forgiving debt does nothing to reduce the high cost of a college degree. EducationData.org puts the average college tuition increase at 8 percent annually. Remember, this is about four times over the inflation rate before it spiked in 2020. With overall inflation now at the same rate, we can guess that colleges and universities are going to “take price” well over that rate citing higher costs on their side. Why are colleges so much more expensive? A recent paper from the Manhattan Institute blames administrative costs, campus amenities, labor costs, and the easy availability of student loans. Forgiving these same loans reinforces decisions leading to higher costs.

Culture — Setting aside the numbers, perhaps the most important limit on forgiving federal loans is our evolving political culture, which has become split between those who want more from their government at no expense vs. those who want less and want to rely on themselves as responsible adults. How this works varies from issue to issue. A strong bipartisan coalition passed a massive infrastructure bill because we agree that roads, bridges, and internet availability is a public good even if we don’t have long commutes or live in a rural area without high-speed internet.

But under the radar, something else is happening in reaction to the pandemic, and the schools were ground zero. Parents in Virginia revolted against school closings, wearing masks, and how issues of race are taught. These were important to Glenn Youngkin’s gubernatorial victory in how they were framed: parents matter — and he was on their side, not the side of government bureaucrats.

Well, what if you’re a parent who saved money for college, forgoing saving as much for date nights, gifts, vacations, and retirement? You might have told your child that going in-state was their only choice because of costs. Your child goes to college debt-free, and you’ve relayed the most important lesson of adulthood: responsibility. That’s a win, right? It was — until Biden breaks that pact by forgiving student loans. A culture of responsibility no longer exists. You are the sucker. You gave up so much only for the President of the United States to give free money to people who made the other choice, to spend money instead of save, to take on debt — expecting someone else would pay the bill.

In that scenario, the person who pays for “forgiveness” is you.

If Joe Biden forgives federal student loan debt, I don’t think many parents will forgive him. To borrow a riff from Kamala Harris: that parent is me. 

She forgave him. I won’t.

Michael D. Cohen, Ph.D., is CEO of Cohen Research Group, a leading political, public affairs, and corporate research firm. He publishes the award-winning Congress in Your Pocket suite of mobile apps and teaches graduate courses at Johns Hopkins University on research methods, political campaigns, and public policy. He is the author of “Modern Political Campaigns: How Professionalism, Technology, and Speed Have Revolutionized Elections,” published by Rowman & Littlefield.