Today, with the stroke of a pen, President Joe Biden made millions of Americans up to $20,000 richer by excusing them from repayment of money they had borrowed, costing taxpayers hundreds of billions of dollars.
The recipients aren’t the poorest Americans, the neediest, the unluckiest, the most indebted or those serving our nation most nobly. They qualify, rather, because they borrowed money for college.
Politically, it may be savvy to deliver on a key campaign promise to the college-educated base of the Democratic Party. Notably, many of those receiving relief borrowed to finance graduate degrees like JDs and MBAs — a group hardly in need of financial help, but one that will remember this giveaway come November. But from afar, this choice looks absurd. As of June, American households held more than $4.5 trillion in consumer debt (excluding home mortgages), most of which was not student loans. According to the Federal Reserve, fewer than 1 in 4 households have student-loan debt, and it is more common among those with higher incomes. By what logic is “borrowed money for college” a sensible standard for selecting the recipients of unprecedented public beneficence?
The logic is uniquely American, and incredibly harmful. It is captured well in the familiar Hollywood trope of a teenager, discovering his family’s financial troubles, conceding gloomily that he can abandon his first-choice school and attend the state university nearby, only for a determined parent to insist: No, we will find a way.
In America, this is meant to be inspiring. But the statistics suggest it’s more likely to be a tragic mistake.