Biden and Student Debt: A 40-Year Love Affair
By David Sirota, Julia Rock and Walker Bragman, The Daily Poster and
Newsweek
24 February 21
President Joe Biden may not be a particularly ideological politician, but
one of the few things he seems to absolutely believe in is debt. In
particular, student debt.
On the campaign trail he appeared to suggest otherwise, repeatedly promising
that he would support some incremental action to forgive student debt,
tweeting that the federal government should forgive "a minimum" of $10,000
of college loans.
Last week, however, Biden defied Democratic leaders on the issue, declaring
"I will not make that happen" when asked whether he supported Senators Chuck
Schumer and Elizabeth Warren's proposal to go farther and cancel up to
$50,000 of federal student debt-and his administration refused to commit to
using existing executive authority to reduce that debt.
The declaration echoes a point of contrast between Biden and Sen. Bernie
Sanders during the 2020 Democratic presidential primary, when the Vermont
independent pushed for full student debt cancelation. Biden's statement also
rekindles a bitter conflict between him and Warren, who as a Harvard Law
professor excoriated him in harsh terms for consistently opposing debt
relief. She is now calling on Americans to press Biden to use his existing
executive authority to enact more debt relief, but the White House is
balking.
The entire episode is a reminder that Biden's current position is consistent
with his 40-year history of leaving Americans loaded down with bills as a
consequence of seeking a higher education.
Most student debtors are not rich
In justifying his opposition to Democratic lawmakers' proposal, Biden
asserted at a CNN town hall last week that people who went to "Harvard and
Yale and Penn" should not have their federal student debt forgiven. The
refrain echoed the now-pervasive talking point that people who attended
expensive, elite schools would be the primary beneficiaries of student debt
relief.
In reality, only 0.3 percent of people with federal student loans attended
Ivy League schools, while about half attended public universities.
Biden's comment also implied that cancelling up to $50,000 worth of student
debt would primarily help rich people, which is also inaccurate.
An October report from the Washington Center for Equitable Growth-which was
co-founded by one of Biden's top economic policy advisers-found that "the
student debt burden in the United States falls most heavily on those U.S.
households in the bottom 50 percent of the income distribution-and even more
on Black American households."
Those findings were echoed by a new study from the Jain Family Institute
which shows that most people with outstanding federal student loans live in
census tracts where the median income is less than $40,000.
"The sheer number of borrowers in low- and lower-middle income categories
outnumber those in the higher-income groups," noted the study, which
concluded, "Thus, the greatest share of the benefit from cancellation
accrues to people living in lower-income communities, relative to
higher-income ones."
Study authors Laura Beamer and Eduard Nilaj analyzed the credit reports of a
million 18- to 35-year-old borrowers by census tract in order to assess the
distribution of student loan debt by income.
Not only did they find that far more people who have student debt live in
low- to middle-income census tracts than higher-income ones, but people in
those income tracts hold about 75 percent more of the total outstanding debt
than people in middle- to high-income areas.
The data directly contradicts the false argument that cancelling student
debt would primarily help wealthy people.
"Cancellation of $50,000 would get over 80 percent of young borrowers out of
student debt," Nilaj tweeted. "And inside that 80 percent, over 71 percent
would be borrowers living in working class and lower-middle class areas."
Another key finding from the study: the average amount of outstanding loans
has increased over the past decade, and low-income people and people of
color comprise a much larger portion of the student debtor population than
in 2009.
Those arguing against student debt cancellation point out that high-income
people are more likely to have higher amounts of debt, either because they
attended more expensive schools or because they were more likely to take out
larger loans. But that argument misses the point: While a larger percentage
of high-income student debtors have larger outstanding balances, there is a
much higher number of low-income people with large amounts of debt.
And as the chart shows, cancelling only $10,000 in student debt would likely
fail to adequately help the majority of low- and middle-income debt holders.
"Single biggest stimulus"
Beyond the fact that student debt cancellation would help low- and
middle-income people more than it would help rich people or Ivy League
grads, it is also a popular policy that would narrow the racial wealth gap
and stimulate the economy.
In November, Warren said that student debt cancellation would be the "single
biggest stimulus we could add to the economy." A majority of voters support
student debt cancellation by a 17 point margin, according to a new poll by
Data for Progress, and their support for the policy does not waver if the
cancellation amount is $50,000 rather than $10,000.
Forgiving federal student loans would also help reduce the longstanding
racial wealth gap created by job and income discrimination and school
segregation, trends that have been aided by the federal government. Black
borrowers hold more debt than their white counterparts and are less likely
to be able to pay it back than white borrowers.
As Rep. Alexandria-Ocasio Cortez pointed out on Twitter: "Entire generations
of working class kids were encouraged to go into more debt under the guise
of elitism." The promise of educational attainment as a way of achieving
better economic outcomes has failed to materialize, especially over the past
decade.
"It used to be that people who held student debt were a relatively small
share of the population, disproportionately people who went to medical
school or law school or some other high-cost professional program," said
Marshall Steinbaum, a senior fellow in higher education at the Jain Family
Institute who advised the new study.
"It's becoming the case that there are more and more people who are student
debtors... which means that there are more people who don't have that high
of a level of educational attainment, who go to different types of
institutions, who don't live at the top of the income distribution. The set
of people who have student debt is becoming more and more like the
population as a whole."
After Biden declared his opposition to Schumer and Warren's proposal for
$50,000 of debt relief, White House spokesperson Jen Psaki said the
president believes any "relief above $10,000 should be targeted based on the
borrower's income, based on the kind of debt in question, public schools
versus private schools, graduate schools versus undergraduate. Obviously,
there's a lot of considerations at play."
The statement reflects the Democratic Party's commitment to complexity and
means-testing. The party that once championed wildly popular universal
programs like Medicare and Social Security now tends to offer narrowly
tailored proposals that skimp on benefits and eligibility-even as such
limitations end up excluding millions of people.
With the promised $2,000 stimulus checks and now with student debt relief,
opponents contend that without strict means testing, both initiatives would
wrongly aid affluent people who don't need help. And yet, data show that
means testing both initiatives would exclude millions of middle-class people
who absolutely do need the help.
"I would like to congratulate my worthy opponents who've spent years falsely
claiming that student debt cancellation is regressive," Steinbaum tweeted
after Biden's CNN event. "Congratulations: you won. You've successfully
deceived the political system such that millions of people will be
immiserated who didn't have to be."
A history of aiding the lending industry
Throughout his career, Biden has had a reputation for being on the side of
lenders. Between 2003 and 2008, he took $500,000 from the lending industry.
In 2005, he was one of 25 Democrats to sign onto Republican-led bankruptcy
reform legislation that removed protections on private student loans. The
bill was considered a giveaway to lenders and helped create a $125 billion
bubble in private student loan debt.
In a 2015 International Business Times report, David Sirota and Matthew
Cunningham-Cook detailed Biden's long record working to make it harder for
Americans to discharge educational debt in bankruptcy court:
As a senator from Delaware-a corporate tax haven where the financial
industry is one of the state's largest employers-Biden was one of the key
proponents of the 2005 legislation that is now bearing down on students...
That bill effectively prevents the $150 billion worth of private student
debt from being discharged, rescheduled or renegotiated as other debt can be
in bankruptcy court...
Biden helped lenders make it more difficult for Americans to reduce debt
through bankruptcy-a trend that experts say encouraged banks to loan more
freely with less fear that courts could erase their customers' repayment
obligations. At the same time, with more debtors barred from bankruptcy
protections, the average American's debt load went up by two-thirds over the
last 40 years. Today, there is more than $10,000 of personal debt for every
person in the country, as compared to roughly $6,000 in the early 1970s.
That increase-and its attendant interest payments-have generated huge
profits for a financial industry that delivered more than $1.9 million of
campaign contributions to Biden over his career, according to data compiled
by the Center for Responsive Politics...
Biden led the fight against his own party's efforts to soften the bill's
impact on some of the most vulnerable debtors. In one case, he voted against
an amendment that would protect divorced mothers who failed to receive child
support from having to repay a portion of their debts in bankruptcy. He
voted to oppose an amendment barring firms from charging more than 30
percent interest on loans. In still other cases, he voted against extending
special bankruptcy protections for soldiers, victims of identity theft and
those with especially high medical debt.
In the early 2000s, Warren-who is now pressing the White House for $50,000
of student debt relief-led the fight against Biden's original bankruptcy
bill. She slammed Biden as a "zealous advocate on behalf of one of his
biggest contributors" and wrote that when it comes to debt, Biden "should
not be allowed to sell out women in the morning and be heralded as their
friend in the evening."
In campaigning for president, Biden distanced himself from-and at times
misrepresented-his record trying to slash Social Security, passing draconian
criminal justice policies, and helping lead America into the Iraq War. By
contrast, when it comes to student debt, he is sticking with his old ways,
offering as little relief as today's politics would allow.
While his past defense of debt bondage involved him defending a powerful
private finance industry that bankrolled his campaigns, he is now refusing
to erase debt owed to the government, a public entity to which he has no
political obligations. Biden won't even budge on the issue of publicly held
debt, despite the fact that doing so would be extremely popular and wouldn't
enrage any campaign sponsors.
He seems to genuinely believe that when it comes to student debt, nothing
needs to fundamentally change.
