Rising student debt is one of those issues that crops up every few years and is still grossly misunderstood. The cost of living crisis has been a catalyst to unearth this old issue once again, and predictably there has been great pressure on the government to forgive the debt. 

To this end, with one eye on the upcoming midterms, President Biden has unveiled a plan to cancel $10,000 worth of debt for millions of graduates, and in some cases up to $20,000. The president’s plan raises important questions about fairness, as well as the underlying reasons why education costs so much in the first place.

Student loan debt forgiveness is a costly handout and fails to address the real issue

President Biden knows that student loan debt forgiveness would give his party’s popularity a huge boost among college graduate voters who have benefitted from the federal loan program. But what the Biden administration is essentially offering is simultaneously a handout for some and a slap in the face for others.

Wiping the student loan debt of middle-class graduates earning up to $125,000 will not come cheap, and those footing the bill will be taxpayers, either with no college education or who have already paid their tuition costs in full.

It is unfair to characterize the complaints of those who have finished paying off their debts or worked throughout college as a case of wanting others to face hardship just because they had to. 

Likewise, as inflation and the associated cost of living crisis continues to place financial strain on workers across the board, it is understandable why hardworking taxpayers without college degrees would consider themselves hard done by in being forced to subsidize the college education of others.

The amount of debt being written off, while extremely costly to taxpayers (roughly $500 billion) and further increasing both inflation and the national debt, will only go some way towards helping struggling graduates, as the average student loan debt nationwide stands at $37,667.

But here is perhaps what is most frustrating about Biden’s student loan debt forgiveness plan:

  1. As it stands, the plan put forward does nothing to address the root causes of the spiraling costs of college education, therefore condemning the next generation of students to a similar struggle and future taxpayers to face the same problem all over again.

  1. Student loan debt forgiveness can be characterized as a regressive policy in that it disproportionately benefits higher income households at the expense of working-class taxpayers who are already struggling.

Government policy has been driving up the cost of college tuition

The primary factor behind the dramatic and sustained rise in college tuition costs in recent decades is the incentive system put in place through government policy. When the federal government subsidizes student loans, this gives educational institutions an incentive to push up their prices far beyond what they would otherwise be in a free market.

Terrible incentives are a long-term problem that will continue to impact future students as they borrow ever larger sums of money for degrees with decreasing returns. The current model of federal loans is simply unsustainable and has been for some time.

Over the past four decades in particular, the cost of college tuition and fees skyrocketed relative to overall inflation, and there is nothing to suggest things will improve on this front so long as the federal government continues handing out student loans at whatever price educational institutions ask for.

Furthermore, according to an estimate by the Committee for a Responsible Federal Budget, should Biden’s student loan debt forgiveness plan be implemented, cumulative student debt will take a mere 4-5 years to return to its current level.

As such, until the issue of rising tuition fees is addressed at its root, future generations of students will face exorbitant costs that will no doubt continue to be passed on to taxpayers through periodical student loan debt forgiveness plans.

Interested in hearing more about pro-liberty ideas and solutions? If so, LibertyCon International, Students For Liberty’s flagship event, is an occasion you won’t want to miss. 

Held in Miami, Florida, on October 14-15, 2022, this two-day conference offers attendees an opportunity to connect with other liberty-minded individuals and engage with our fascinating lineup of speakers.

If you’d like to attend LibertyCon International in Miami this October, be sure to click on the button below to register and book your room with the discounted rate. You can use the code LEARNLIBERTY for 50% discount on your tickets!

We look forward to seeing you there!

This piece solely expresses the opinion of the author and not necessarily the organization as a whole. Students For Liberty is committed to facilitating a broad dialogue for liberty, representing a variety of opinions.