24 February 21
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FOCUS: David Sirota, Julia Rock and Walker Bragman | Biden and Student Debt: A 40-Year Love Affair
David Sirota, Julia Rock and Walker Bragman, The Daily Poster and Newsweek
Excerpt: "In his new fight with Elizabeth Warren, the president is falsely insinuating that student debt relief would help rich people."
resident 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.
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