On Friday, the Supreme Court ruled against President Joe Biden’s student loan forgiveness plan. This decision ensures that inflation will not get out of hand, and resists economic disparities for poor households. It also eliminates any pressure on colleges to boost tuition, a result of inflation from student loan forgiveness: The more students borrow, the more colleges would increase tuition, thus the more students would borrow and burden taxpayers.
As we know, canceling any form of debt in the United States does not erase it from the economy. Instead, the financial responsibility is transferred from students to taxpayers. In the Supreme Court’s estimate, President Biden’s plans would have cost about $430 billion.
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According to a statistic published earlier this month, by 2021, only 37.5% of Americans graduated with a college degree or higher. This suggests that the majority of families in the U.S., whose children do not attend college, would have to deal with increased taxes and inflation to cover college students.
The population of people with student loans is a relatively stable demographic. While student loan forgiveness would benefit stabler families, class disparities would widen, and inflation would harm people who depend on government programs to feed their children. Using federal funding to forgive student debts would harm the lower class, which is largely dependent on federal funding.
For example, take families who participate in the Supplemental Nutrition Assistance Program, the main government food stamps program.
According to the United States Department of Agriculture, 40.92 million people receive food stamps. Forty-nine percent of households that receive food stamps are in poverty, with a median household income of $19,050. This takes us far from the middle class. On the other hand, student loan families are hardly struggling. A survey from 2019 found that the median income of households with student loans is $76,359, with only 7% of those households being in poverty. Only 4% of those making payments on their loans, and who would receive an immediate cash flow from student loan forgiveness, are in poverty.
An economist at Brookings noted the extreme disparities between student loan families who would receive an immediate influx of cash and poor families receiving food stamps. Lower-class people, such as SNAP beneficiaries, who could not afford to send their children to college, would suffer under the inflation caused by student loan forgiveness. Meanwhile, wealthier college families would profit the most. Clearly, the Biden administration’s plan would not be a productive use of federal funding.
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Last August, the Committee for a Responsible Federal Budget estimated that the Biden administration’s student debt policy would boost inflation by 15 to 27 basis points — meaning, 0.15-0.27%. The Social Science Research Network produced corroborating data demonstrating that student loan cancellation could hike up tuition prices. The study suggested that if students are able to apply to schools with the expectation that a chunk of their debt will be paid off by the government, colleges will feel pressured to increase tuition.
Student loan forgiveness would cause economic inflation and hurt the lower class. We should be grateful to the Supreme Court for protecting the economy from yet another disastrous plan from the Biden administration.
Briana Oser is a summer 2023 Washington Examiner fellow.