“Don’t tell me what you like. Show me your budget and I’ll tell you what you value. ”

– Joe Biden

Even modest student loan forgiveness plans are expensive and use federal funds that can boost other goals. The sum included in the loan pardon request being discussed is greater Total Over the past several decades, it has been involved in many of the country’s major anti-poverty programs.

There are better ways to spend that money on better goals. Increasing spending on more targeted policies will benefit poorer, poorer families and those who are more likely to be black and Hispanic than those who benefit from broader student debt forgiveness. Of course, spending on other safety net programs can be a great way to help low-income people and people of color.

Student loan relief Can Designed to help those most in need, to promote economic opportunities and reduce social inequality, but if it targets borrowers based on family income and post-college income. Loans of high-paying college diplomas that are sold as a way to help struggling borrowers do not need and should not take advantage of credit.

Forgiveness of credit in the view of credit

Student loan forgiveness is one of the largest transfer programs in American history, given the size of the budget and the cost to taxpayers. According to the Department of Education, the forgiveness of all federal loans (as suggested by Senator Bernie Sanders) will cost $ 1.6 trillion.[1] Forgiveness of debts of up to $ 50,000 (according to senators Elizabeth Warren and Chuck Schumer) costs about $ 1 trillion. According to President Biden, limiting debt forgiveness to $ 10,000 would cost $ 373 billion. According to each of these ideas, all 43 million borrowers will benefit to varying degrees.

To put those numbers in perspective, the table below compares the value of these three one-time student loan apologies Total Over the past two decades (adjusted for inflation from 2000 to 2019) on several major transfer programs in the country.

Click on chart to expand.

Forgiveness of all student debts will be a significant increase in the amount of unemployment insurance the country has spent over the past 20 years, the amount it has spent on income tax credit, and the amount it has spent on food stamps. . A.D. By 2020, some 43 million Americans depend on food stamps to feed their families. To qualify, a family of three must earn less than $ 28,200 a year. The country’s largest anti-poverty program (EITC) In 2018, it will benefit nearly 26 million working families. That year, credit lifted 11 million Americans, including some 6 million children, and reduced poverty to another 18 million individuals.

Forgiveness of student debts of up to $ 50,000 is the same as for the amount of Supplemental Security Income (SSI) and the total amount spent on all housing assistance programs since 2000. And a few properties. Recipients must have assets less than $ 2,000. About half of them have another zero income.

The cost of pardoning a student debt of $ 50,000 is about double what the federal government has spent on all Pel Grant recipients over the past two decades. Unlike federal loans for undergraduate and graduate students, graduate students, and parents, Pell Grant is only available to low- and middle-income undergraduates. About seven million students benefit each year, many of them poor and most of them non-white.

Debt forgiveness includes even $ 10,000 that the country has spent on TNF since 2000 and since then through the school’s breakfast and lunch program to feed hungry school children. . It also spends money on energy support programs to feed low-income pregnant women and infants or to warm their homes during the winter.

Who benefits from comparable transfer programs?

In addition to the total debt forgiveness, student loan waiver beneficiaries will be more income-generating, better educated, and whiter than other transfer programs. The following table describes the economic and demographic characteristics of users of selected income support programs as well as student debt relief.

Food stamps, for example, serve families with an average income of about $ 19,000 a year (half of the poor), and an average of $ 2,300 a year for the average family. Medicaid families earn about $ 33,000. 34 percent live below the poverty line. Families who claim income tax credit – the largest income support for working families – receive about $ 36,500. Their average annual benefit is about $ 2,200.

Characteristics of Transferred Transfer Recipients

Click on the table to expand.

The average income of student loans is $ 76,400, 7 percent below the poverty line. Of those who repay their loans (and benefit immediately from the amnesty payment), the average income is $ 86,500, 4 percent of them in poverty. If debt forgiveness is limited to $ 50,000, the average benefit of these families will be approximately $ 26,000 – as we provide a family living on a food stamp for 11 years.

In terms of demography and educational achievement, families with student debts reflect the behavior of families in the general population unless they are better educated. Student loan lenders are more likely to be white and highly educated. Of course, among those who pay student loans, the number of white families is the same as in the general population, but they are twice as likely to get a BA and a bachelor’s degree.

In contrast, families who use federal programs, such as SNAP, EITC, SSI, or Medicaid, are more likely to be black or Hispanic, and have a lower level of education. Few went to college, and no one has a graduate degree.

For reference, 66 percent of all families are white, 13 percent black or African American, and 14 percent Spanish. About 42 percent have a BA and 18 percent have a bachelor’s degree.

In short, the entire Board of Trustees for Student Loan Forgiveness is designed to reduce the risk and promote opportunities and help people who need help be more likely to be income earners, better educated and whiter.

Prioritizing spending on targeted programs can therefore be a more effective way to achieve goals. For example, Biden’s idea of ​​a full refund of a child’s tax credit is only for children living in poverty. Twenty-six percent of users of that policy are black and 29 percent Hispanic. That is a progressive change that will increase the income of millions of very poor children. It also benefits many student creditors – as well as many who do not have student loans.

Targeting student loan relief

Student loan relief can be targeted at those most in need.

Use the borrower’s financial support application: Every student with a federal student loan has already completed an application for financial aid (and that application will be registered with the Department of Education). That information can be used to target assistance based on the student’s financial situation at the time of application. Pell Grant, for example, is available only to undergraduate students from low- and middle-income families. As a result, Pel Grant recipients are more likely to come from poor families than black and Hispanic students than other post-secondary students.

Biden proposes to double Pell Grant. If prospective students get extra grants, alumni may argue that they should have had that opportunity too – and we can reduce the amount of borrowers’ first degree loan balances with Pel (plus interest). That focuses on the benefits of debt forgiveness for more progressive and disadvantaged students.

Payment due to income; Income-driven payment plans (such as your paycheck, or PAYE) remain a great way to target debt relief and forgiveness for low-income students after enrollment to pay off student debt. Biden Management has new tools to enroll students enrolled in the FUTURE Act and stay on income-generating plans.

Student loans do not go unnoticed, so it is important to make income-generating plans effective. Even the most ambitious “free college” proposals cover only tuition and fees in government institutions, so they humbly reduce the amount of new student debt. Postgraduate students, private college students, and students who borrow money to cover their living expenses are dependent on loans to support their education. Those costs represent many loan dollars each year. Income will be needed to help these future borrowers manage their loans.

Among the targeted debt relief for low-income families, through amendments to income-generating plans and pardons (such as public service loans) in the books, Congress and the Biden administration can reduce federal debt problems and boost economic growth. Opportunity: Forgiveness without a board loan. Congress and the administration cannot do everything. We need to balance student loan debt with other cost priorities and be clear about what we take most.

[1] According to the Department of Education, borrowers owe a total of $ 1.57 trillion – $ 500 trillion in arrears under $ 50,000, and $ 377 billion in arrears below $ 10,000. The CBO estimates that student loans will be 3% of new loans by 2021. As a result, I estimate the price is 97% of the value reported by 97 departments. Education. For purposes of understanding the amount transferred, the face value is also relevant because it reflects the total amount of assistance provided to students. These estimates are higher than the estimates based on the Consumer Expenditure Survey (SCF) data, because no one-third of student debt was reported in that survey.