Benefits of Biden’s Student Loan Forgiveness Will Overwhelmingly Go to the Wealthy
President Joe Biden’s student loan forgiveness plan will largely help borrowers whose salaries are in the top half of American incomes, according to a Monday analysis by the Committee for a Responsible Federal Budget (CRFB).
Biden announced in August his plan to forgive $10,000 in student loans for individuals making less than $125,000 or families making less than $250,000, forgiving an additional $10,000 for individuals who received Pell Grants. The plan, though marketed by the Biden administration as support for low-to-middle class borrowers, will provide between 57% to 65% of benefits to individuals in the top 50% of income brackets, according to the analysis.
“The actual benefit is likely to be more regressive,” the report read.
The analysis found that the loan forgiveness plan will benefit high-income borrowers because many will be grandfathered in based on their reduced 2020 earnings, while many low-income buyers will be excluded due to a lack of resources.
The Congressional Budget Office (CBO) estimates only 90% of those eligible will apply for loan forgiveness while the Department of Education only expects 81%. The disparity in loan applications is predicted to affect low-income borrowers who have fewer resources and less access to apply for the forgiveness, according to CRFB.
The method for determining the income of applicants is also flawed, the analysis argued, as the metrics used to qualify an applicant are based on 2020-2021 income statements, which may be lower for higher-income earners due to increased turnover in high-income jobs during the COVID-19 pandemic.
“Those in the top half of earnings receive a much larger share of the financial benefit of debt cancellation, since higher-income borrowers are more likely to pay back their loans in full and face higher average interest rates,” the study reported.
On Thursday, the Biden administration scaled back the student loan forgiveness plan to exclude loans from private lenders, according to ABC News. The plan’s reduction follows recent lawsuits against the Biden administration claiming he does not have the power to forgive debt.
The White House did not immediately respond to the Daily Caller News Foundation’s request for comment.
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