Cover photo courtesy of Gage Skidmore on Wikimedia Commons
President Biden’s student loan forgiveness plan signed on Wednesday, August 24, will forgive $10,000 of student loan debt for those making under $125,000 per year (or $250,000 per couple). Most Americans will not receive benefits from this plan as those who worked hard to pay off their student loans, those who chose not to go to college, and those who have yet to take out student loans, as it will only further raise tuition costs and worsen the already runaway inflation. Instead of helping those that need it most, this “reverse Robinhood” plan is essentially giving welfare to the affluent being paid for by the less fortunate.
Ronald Reagan famously said that "The nine most terrifying words in the English language are: I'm from the Government, and I'm here to help," and this rings especially true in the case of the government attempting to assist college students. Like always, the government was trying to do the right thing by making college more affordable, but what we now know is that for every dollar given in government student aid, tuition increases by 60 cents (The Federal Reserve Bank of New York). Government involvement has drastically increased the price of a college education, and it shows no signs of stopping. This means that by the time many current high schoolers get to college, tuition will increase even more because of student debt forgiveness. According to Brian Riedl, a senior fellow in budget, tax, and economic policy at The Manhattan Institute, “Students will likely feel liberated to borrow more money on the assumption of future loan forgiveness, and universities will take advantage of the additional borrowing by raising tuition.” Instead of solving the student loan crisis, The Biden Administration’s student loan forgiveness plan will only be worsening it by causing colleges to raise tuition.
In Economics 101, students learn that inflation is the devaluing of currency and that the best way for the government to control it is by increasing taxes and decreasing government spending. When the government increases government spending during a period of high inflation, it must increase taxes even more to reduce inflation, or deal with even higher inflation. Right now, according to The Bureau of Labor Statistics, inflation is at 8.5%. To put it in perspective, each year the target for inflation is 2%, so our current inflation rate is astronomical in comparison. Current inflation is so high, that Congress recently passed the Inflation Reduction Act, a piece of legislation meant to combat inflation, but according to The Committee for a Responsible Federal Budget, “debt cancellation would boost near-term inflation far more than the IRA will lower it.” An increase in government spending is the exact opposite of what we need, as it will only significantly worsen our current predicament.
The famous economist Milton Friedman once said that “there’s no such thing as free lunch,” but we must realize that there is also no such thing as free college, as someone will always have to pay for it.