Elitist student loan bailout turns blind eye to struggling Americans

Last Tuesday, the U.S. Supreme Court heard oral arguments in two challenges to the Biden administration’s student debt cancellation plan, which would forgive federal student loans for 40 million Americans at a cost of $430 billion. The Court is considering whether the administration has the authority to cancel the debt and whether it followed the proper rule-making process for setting up the program.

The Court cannot address another troubling issue in play, but it should be on the mind of every American struggling in today’s economy — the elitist redistribution of wealth inherent in President Biden’s program.

A recent study published by the Brookings Institution shows that enrollment in post-secondary education is significantly higher among students from wealthier families. Nine out of 10 high school freshman from families with incomes in the top 20 percent enrolled in higher education within 18 months of graduation — compared to just half of those in the bottom 20 percent.

In other words, the college-going population disproportionately consists of people from high-income families, despite decades of attempts to create equal access to higher education. Total debt amounts follow the same pattern. According to the Education Data Initiative, 65 percent of student loan debt is held by Americans with incomes higher than the national average. Just 12 percent of student debt is held by the poorest Americans. Any student debt forgiveness that happens today will largely go to the top half of society — at the expense of everyone else.

The White House website notes that federal aid has not kept pace with the rising cost of attending college and cites that as an argument for the new forgiveness program. But the program does nothing to rein in those costs or hold colleges accountable for the product they offer. Colleges are failing if their students can’t get a job that covers the cost of their college loans. What’s more, with retroactive and ever-increasing federal aid, which is part of President Biden’s overall plan, the customer is no longer the student but the government itself.

As the government becomes the main customer for colleges, disadvantaged Americans will not realize the promised benefits of higher education, even if it is more available. If institutions have little market incentive to make sure students obtain high-paying jobs after school, they are likely to skimp on preparing students for the workforce.  

Instead, colleges seeking revenue will focus on ancillary services that attract students and the federal dollars attached to them. We are already seeing this cycle play out with excessive administrative bloat at higher education institutions with a wide range of non-academic roles like “success managers” and “student accountability” workers — which may sound enticing to young adults but don’t translate into skills that land jobs.

These services, which add little to a student’s education, don’t come cheap. The Bureau of Labor Statistics shows the 2021 median pay of a higher education administrator as $96,910 per year, or 136 percent of the same year’s median household income. Student loan forgiveness is also paying these salaries, at the expense of Americans producing more and earning far less.

Making it possible for more Americans to attend college is a laudable goal. But we will never be able to achieve it by spending our resources on retroactive grants to Americans who were already in the best position to afford higher education and now are most likely to have high paying jobs. Furthermore, if colleges don’t feel the pressure to prepare their graduates for the most lucrative jobs, the teaching of in-demand skills is likely to decline. Does it matter whether college is affordable if it isn’t valuable?

President Biden must have felt pressure to deliver on his campaign promise to forgive student debt, especially in the context of his dismal approval ratings. But his program that funnels money to a largely privileged group is elitist and counter to the interest of the country as a whole. It is too bad the Supreme Court won’t be delivering a verdict on that point.

Erin Norman is the Lee Family Fellow and the senior messaging strategist at State Policy Network.