Experts analyze GOP governors’ letter to Biden on student loan forgiveness
Earlier this week, more than 20 Republican governors signed on a letter calling on President Joe Biden to cancel his plan to relieve certain types of federal student loan debt.
On Wednesday, Governor Glenn Youngkin’s signature was added. According to his spokesperson, Macaulay Porter, there was a delay in processing his signature for the letter.
VPM News asked some experts to unpack some of the claims included in the letter.
Claim #1: Biden’s loan forgiveness program will “further encourage students to borrow, incentivize higher tuition fees, and further drive up inflation.”
David Feldman – an economics professor at William & Mary – said the likelihood of the plan causing a surge in inflation is “extremely low, nil”. He said the idea that the policy would make inflation worse “is very poorly supported in theory and not at all in evidence” because the impact of loan forgiveness on how much people are currently spending is very small.
Also, he points out: “The same statement can be made about any program of public spending. Does SNAP contribute to inflation? And the Department of Defense? I mean, you could say that every federal expenditure is just as causally linked to inflation as this relatively small debt forgiveness. So I think the inflation argument is a duck.
Regarding incitement to higher tuition rates, Feldman said the letter attempted to invoke Bennett’s hypothesiswho argues that colleges will increase tuition when financial aid increases.
Feldman said: “The best studies that pay great attention to statistical methods have shown that there is very little or no impact [on tuition rates after] an increase in the federal subsidy. And it’s not even an increase in federal grants, it’s just debt forgiveness. But an increase in the federal grant, such as adding to the Pell grant or allowing students to borrow more… the evidence that this contributes to an increase in tuition – the list price printed in the catalog – is concentrated in a sector of the higher education system and it is the for-profit.
“There is very little credible evidence that allowing students to borrow more or add to the Pell Grant does anything about public university pricing.”
Claim #2: “Shifting the burden of debt from the wealthy to working Americans has a regressive impact that hurts low-income families. »
Feldman said that claim is flawed because the wealthiest Americans — those in the top 5% — will not benefit from Biden’s plan. Meanwhile, those who will benefit are the one-third of borrowers nationwide who have student loan debt under $10,000.
“Who are these people who have these relatively small amounts of debt? It’s not the doctors and lawyers and business professors,” Feldman said. “The overwhelming majority are people who were enticed to try college. They tried it for a semester or a year, borrowed $9,000 in the attempt, decided it wasn’t for them and left college with no degree, no degree and $10,000 in debt.These are people whose financial lives [have been] upside down and don’t have many other ways to fix it. »
Feldman also pointed out that the debt picture is very different from what it was 30 or 40 years ago. The “constant withdrawal of states from funding their public institutions” has caused more students – even those attending community colleges – to have to borrow in ways they did not have to borrow in the past, said Feldmann.
James Murphy, senior policy analyst at Education Reform Now, points out that while the state of Virginia covered 77% of the cost of public higher education in 2001, it covered 48% in 2019.
“Previous generations went to college at a time when states were investing a lot more in public higher education,” Murphy said.