Biden's student loan plan misses the mark

Since 1990, college tuition, room and board, and fees have increased 130%, after inflation.

President Joe Biden’s plan to grant $10,000 of college student-loan forgiveness for debtors who earn up to $125,000 a year ($250,000 for couples), and a total of $20,000 for students who received Pell grants reserved for the most financially challenged students, won’t change that trajectory.

Total college debt stands at $1.7 trillion, spread among 43 million borrowers. Biden’s plan would knock that number down by $330 billion, while retiring the debt of about 20 million borrowers. But with students taking out about $90 billion in new loans each year, total college borrowing will set a new record in 2026, just four years after Biden’s relief hits.

College loan forgiveness has been a prime political football in the Democratic Party since the 2020 campaign, with Biden promising his $10,000 forgiveness and Sens. Elizabeth Warren and Bernie Sanders demanding larger boons. Now, with a pivotal congressional election approaching, Biden is looking to keep a promise, and control of a congressional chamber. Or two.

But Biden’s plan has obvious shortcomings. It’s based on the income of borrowers whose college educations were often footed by prosperous parents. That means a young graduate earning $120,000 annually would still get the repayment no matter how wealthy the parents.

Worse, Biden’s plan fails to force colleges to tackle affordability. The White House news release on the plan states “colleges have an obligation to keep prices reasonable and ensure borrowers get value for their investments, not debt they cannot afford.” But it doesn’t provide a method for making colleges do so, or create a penalty if they don’t.

A failure to repay student loans also can be the colleges’ failure. Some sucked young people into borrowing too much to learn too little, failed to provide the educational support students need to get their degree or certification, or drew them into courses of study too expensive for the careers to which they lead. In these cases the colleges, not just the taxpayers, ought to help borrowers overcome the debt.

A meaningful plan to take on college debt would have addressed future costs, driven the aid to borrowers who needed it most, and addressed the underfunding of college by governments. Much of this money is owed because Pell grants that covered 80% of the cost of a four-year public college degree in 1980 now pay for a third of such expenses. And at public colleges and universities the share of revenues contributed by students has doubled since 1988, while the share from state and local governments dropped 35%.

Taxpayers who will have to foot this bill without benefiting from it are understandably irked. Unless the real problem of runaway college costs is addressed, this college-debt bailout’s claim to fame may be that it was the first of many.