You almost have to pity the Biden Administration officials tasked with devising an economic justification for its latest student-loan forgiveness vote-buying ploy. Readers may get some laughs from their howlers.
The White House Council of Economic Advisers (CEA) acknowledges in a report this week that President Biden has already provided enormous debt “relief” to borrowers through his sweetened income-based repayment plans. These plans cap borrower payments at 5% of discretionary income, waive future interest accruals, and discharge remaining balances after 20 years.
Thanks to this back-door loan forgiveness, 4.3 million borrowers don’t have to make payments. CEA’s simulations also show that “an average borrower with a bachelor’s degree could save $20,000 in loan payments.” One with an associate degree would pay roughly $11,700 less than under standard repayment plans, not adjusting for inflation.
But the White House economists say even more debt relief is needed because the wage premium for workers with degrees hasn’t increased commensurately with college sticker prices. “Rapid and unforeseeable rises in prices and declines in college wage premia have contributed to decades of ‘unlucky’ college-entry cohorts,” the report says.
So students who chose expensive degrees that haven’t led to gainful employment are merely “unlucky.” And because employers don’t appropriately value their degrees, the government must subsidize these poor graduates.
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Author: Ruth King
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