Blanket Student Loan Forgiveness was Always Bad Policy. It’s an Even Worse Idea Now.

It would be economically fraught, legally dubious, and politically harmful.

By Lanae Erickson

If you spend any time on Twitter, you know that loud and increasingly aggressive voices have called for President Joe Biden to #CancelStudentDebt pretty much every minute of the day since he took office. From Senators to celebrities, the slogan has been all the rage, even donning posters pasted to the lampposts all around the White House. And to the pundits that reside in this milieu, it seems like debt cancellation would be an obvious way to energize the Democratic base of young voters in advance of a midterm election.

He’s resisted the pressure for 17 months. But this week, the scuttlebutt is that the President might succumb and attempt to use his magic executive pen to provide blanket debt forgiveness. If he does, it will be a huge mistake. Why? Because it would be economically fraught, legally dubious, and politically harmful.

Let’s start with the economy. The President has finite tools to quell inflation, but Biden and this White House have used every one at their disposal to get it under control. After more than a year of rising inflation, this month’s benign reading has led many economists to conclude that it may have finally reached its peak. So why on earth would they do something that would actively make it worse?

Biden and this White House have used every one at their disposal to get it under control. Why on earth would they do something that would actively make it worse?

Analysts from the Committee for a Responsible Federal Budget calculate that $10,000 in blanket loan forgiveness would erase the deficit reduction we just achieved in the Inflation Reduction Act (IRA) and add 15 basis points (.15%) to the inflation rate immediately, creating more inflationary pressure in the future and eliminating any near-term inflation-fighting benefits we might see from the IRA. And we know that advocates of student loan cancellation won’t even be satisfied with $10,000 — can you imagine what those numbers will look like if the White House takes their advice to the tune of $1.6 trillion?

That’s the most evident reason the President shouldn’t surrender to the Twitter mob. The second is more under the radar, at least when it comes to this subject: the Supreme Court. We all remember back in June, when the Court wiped away a woman’s right to bodily autonomy. Less noticed was another decision that struck down climate rules as an inappropriate use of executive authority. While the idea that President Biden could clear all student loan debt with the stroke of a pen was always on legally shaky ground (e.g. here, here, and here), the EPA decision was the nail in the coffin of the cancellation crowd’s legal arguments. In it, the Court ruled that when something is a “major question” of broad “economic and political significance,” an agency can’t act unless there is “clear congressional authorization.” Even those who have tried to stretch the President’s power in this arena can’t make a colorable claim that kind of authorization exists for broad loan cancellation — and obviously such an action would have enormous economic and political significance. Case closed.

What you’d never guess from the Twitter chatter is that only about 20% of adults hold any student loan debt. That means the number of voters who would benefit from blanket cancellation pales in comparison to the number who might rightly see it as a giveaway to someone else

So blanket loan cancellation is a bad idea economically, and it’s near certain to get struck down in court as illegal. But some on the far left say to heck with those problems, President Biden should do it anyway to juice turnout for the midterms! Unfortunately for the forgiveness folks, they’re wrong again. What you’d never guess from the Twitter chatter is that only about 20% of adults hold any student loan debt. That means the number of voters who would benefit from blanket cancellation pales in comparison to the number who might rightly see it as a giveaway to someone else — cementing the notion that Democrats are elitists who only care about college-educated, suburban voters. Why should someone like me with several higher ed degrees get a $10,000 check from the government while the person who cleans my house who has never been able to enroll gets a big fat nothingburger? Democrats have been hemorrhaging support among non-college voters of all races, and this is the perfect way to cement the notion that we’re out of touch. In addition to those political downsides, there’s little evidence of the promised upside: in fact, only 38% of young voters even support blanket debt cancellation, and when asked what issues concern them most, they’re ten times more likely to say “inflation” than “student debt.”

There are copious other reasons that universal loan forgiveness is bad policy (it’s massively regressive, a proverbial band-aid on a gaping wound, and a giveaway to predatory and low-performing colleges who created these problems in the first place, to name a few). But in the fall of 2022, it’s an even worse idea than usual. Here’s hoping the White House is attuned to these facts on the ground and weights them more highly than the high-pitched screams of the Twitterati.

Lanae Erickson is the Senior Vice President for Social Policy, Education & Politics at Third Way.