Read the full thread from economist, Former Treasury Secretary and former president of Harvard University.
Biden’s actions, per other reports, are for now, at the low end of this range:
Forgiving student loan debt will cost between $300 billion and $980 billion over 10 years, according to a new analysis, with the majority of relief going toward borrowers in the top 60% of earners.
Student Loan Forgiveness Seen Costing Billions, Favoring Top Earners – Bloomberg
The low-end number works out to about $2,000 per Federal taxpayer in the U.S. It means non-college educated subsidize those earning medical, law and business degrees. (Intuitively, about half the population pays Federal income taxes – and that does work out to about $2,000/taxpayer.)
Once loans are forgiven, as Biden is doing, this becomes permanent. Imagine students taking out loans next year or five years from now – will they have to pay off their loans too?
Update: Told you so
The primary purpose of this action is to set in motion a future of free college:
Related:
That proposal, from Yellen, would potentially result in more young people going to college – and remaining out of the workforce for many years. While potentially increasing skills for some, this could remove potential workers from the labor supply for 4 or more years while spending and not earning.
A consequence is this will eventually cost far more than $300 billion: All future students will expect similar gifts.
The Biden Order fails to address the root cause problem: the massive inefficiencies of colleges and universities.
College and universities can raise tuition however they want as it will be paid for by others. Debt forgiveness is a subsidy to colleges just as the mortage interest rate deduction is a subsidy to banks (it enables people to bid up home prices by taking out larger loans – this in turn accrues increased profits to banks). Colleges, rather than address inefficiencies will continue to raise rates; indeed, tuition hikes are among the fastest growing of all goods and services in the U.S. (See chart above).
Students who are not subsidized will pay higher tuition in the future, due to these side effects.
Why do we forgive voluntarily entered into loans while not forgiving involuntary medical debt?
Other than a crude and obvious attempt at vote buying (literally, buying votes), I do not understand the logic behind this. But I am a brain injured idiot and former computer engineer and I only work with logic.
