Criticisms of Biden’s Student Loan Forgiveness: What Are the Haters Saying? Do They Make Sense?

Less than a week has transpired since President Joe Biden announced his landmark executive order to forgive up to $20,000 of individual student loans, and the issue is already shaping up to be a potentially important factor in the 2022 midterm elections. Critics of the plan come mostly—though not all— from the right end of the ideological spectrum. What are the criticisms they raise, and do they have a point?

Will Forgiving Student Debt Make Inflation Worse?

The Biden administration estimates that the total cost of its student debt forgiveness program will come in at $24 billion per year or $240 billion over a 10-year period. Other estimates put the sum considerably higher. The Penn Wharton School’s Budget Model sees the plan costing up to $519 billion to cancel the debt, with total costs of the program hitting $1 trillion.

The United States inflation rate hit its highest point in 40 years earlier in 2022, though it now appears to be on the way back down. But inflation, according to economists, is caused at least partly by increasing the supply of money in an economy. Critics of Biden’s plan say that forgiving billions of dollars in student loans will do just that—pump money into the economy at a rate so fast that inflation will shoot upwards.

Economists at the Wall Street investment bank Goldman Sachs, however, say they have run the numbers and people should relax. That firm’s analysis shows that the student debt relief plan will not jack up inflation. Wealthy people are not eligible to have their loans canceled. The program caps out at personal incomes of $125,000 per year, and according to the Wharton Budget Model, 75 percent of the debt relief will go to households bringing in $88,000 per year or less. The White House is even more optimistic, estimating that about 90 percent will go to Americans earning less than $75,000.

On the other end of the spectrum, low-income individuals with student loans will reap the biggest benefits from Biden’s program—but most people in the low-income range never took out a student loan. The lowest-income 40 percent of households hold only 20 percent of all student debt and make only 10 percent of the payments, according to figures by the Brookings Institute. 

Most of the Biden-mandated debt relief will go to the middle class. As a result, according to the Goldman Sachs analysis, overall payments will drop from 0.4 percent of personal income to 0.3 percent. This small increase in available income is too little to have a noticeable impact on the inflation rate, and whatever tiny amount of inflation it causes will be offset by the resumption of regular monthly payments in January 2023, when the “pause” in payments permitted due to the COVID-19 pandemic comes to an end. 

According to the Financial Times, the student debt relief plan amounts to “an economic nothingburger.”

So Blue-Collar Workers Must Pay Other People’s College Loans?

One of the most common criticisms leveled against the debt forgiveness plan, including by some Democrats, is that the whole idea is unfair to people who have already paid off their student loans or never went to college at all. Numerous Republicans have attempted to claim that blue-collar workers will in fact be forced to pay the debts of those who went to college. 

Republican Senate Minority Leader Mitch McConnell called the debt relief plan “a slap in the face to working Americans who sacrificed to pay their debt or made different career choices to avoid debt.” 

Jim Jordan, a conservative Republican House rep from Ohio asked, “Why should a machinist in Ohio pay for the student loans of a jobless philosophy major in Los Angeles?” 

In fact, Biden has proposed no tax increases to finance the student debt relief plan. The money spent to pay for the forgiven student loans appears likely to add to the national deficit, which is simply a measure of how much the government spends compared to the amount of money it takes in. That could, in theory, lead to increased taxation sometime in the future.

But by how much? According to the Congressional Budget Office, the 2017 Trump tax cuts will add $1.9 trillion to the deficit over an 11-year period, almost twice the amount of even the most pessimistic estimate of the increase the Biden student debt program will cause—and more than seven times as much as the White House estimate. In fact, in the four years of the Trump administration, the deficit grew 5.2 percent—more than in the term of any other president except George W. Bush (11.7 percent) and Abraham Lincoln (9.4 percent).

In other words, if taxes are at some point raised to reduce the deficit, the largest portion of those taxes will go to pay off debts run up by Trump and Bush, with the amount going to pay down student loans a relatively small percentage.

Won’t the Supreme Court Throw Out the Whole Plan?

With a U.S. Supreme Court packed with conservatives—six of them on the nine-justice court, including three appointed by Trump—opponents of Biden’s executive order are reportedly already looking for ways to get the student loan relief program in front of the high court. And according to an analysis by Courthouse News, the plan may well be “dead on arrival” if it reaches SCOTUS.

The precedent that would apply, according to the analysis, is the case West Virginia v. EPA, which the court decided in June. In that ruling, split along ideological lines with a 6-3 vote, the court ruled that the Environmental Protection Agency or any other part of the Executive Branch cannot decide “major questions,” such as regulating greenhouse gas emissions. Only Congress can do that, through legislation. 

The court was unclear on what constitutes a “major question,” but it seems likely that forgiving billions of dollars worth of student loan debt would qualify. 

However, the 1965 Higher Education Act appears to allow the Department of Education, which will carry out Biden’s executive order, to forgive at least some student debt. The law allows the DoE to “modify, compromise, waive, or release any right, title, claim, lien, or demand, however acquired, including any equity or any right of redemption.” 

But some legal experts say the law isn’t clear on whether student loans can actually be forgiven under the 57-year-old law, or merely “modified.” In the past, the DoE has said that the law allows nothing more than altering debts “moderately or in a minor fashion.” But the Office of Management and Budget has interpreted the law to mean that the modifications may be “of any size.”

If the case went before the Supreme Court, the administration would probably have to convince the justices that Congress in 1965 actually intended for the Education Department to forgive large parts, or all, of student loans. 

In what appears to be an attempt to insulate the student debt forgiveness program from the “major questions” problem, the Biden administration says that its authority derives from a 2003 law, the Higher Education Relief Opportunities for Students, or HEROES Act, a post-9/11 law allowing the DoE to wipe out student debts during a “national emergency.” 

The administration cites the ongoing COVID-19 pandemic as the emergency that allows Biden to order student debt forgiveness. The Supreme Court may be forced to take up the question of whether the pandemic in August of 2022 remained the “emergency” that it was in 2020 and 2021.

Working in Biden’s favor may be the simple fact that student loans have been canceled pretty often even before the latest executive order. In August of 2021, Biden canceled $5.8 billion in loans to 328,000 borrowers who were classified as having a “total and permanent disability.” A federal program known as Public Service Loan Forgiveness (PSLF) also allows loan forgiveness for people who choose to work in public service jobs, such as firefighting, teaching, military service, or any number of similar, realtively low-paying occupations.

The day before Biden unveiled his student loan forgiveness program, the DoE announced that it had already forgiven $10 billion in loans under the PSLF.

But will the case ever reach SCOTUS? To get there, someone has to file a lawsuit, and for such a suit to get its day in court, the plaintiff must have “standing.” That is, whoever files the suit must have suffered, or potentially suffered, some sort of actual harm as a result of the debt forgiveness policy.

“I think there are very serious standing questions,” Georgetown Law School Lecturer Frederick Lawrence told Courthouse News. “If you don't like a policy, you vote against the people who put it in place. You can only bring a lawsuit if you're harmed by it.”