President Joe Biden’s debt forgiveness plan won’t solve the student loan crisis or reduce the cost of higher education in America. A better approach would be to optimize the tax and welfare systems to encourage workers to invest in acquiring new skills throughout their lives.
NEW YORK – The student debt forgiveness scheme announced by US President Joe Biden last month can certainly alleviate many of the desperate conditions some borrowers face. But it will do so at a disproportionately high cost. Much of the money spent will go to people who do not really need it. Given that a college degree already confers a significant wage premium, those who never went to college and pay taxes may well perceive this aid as unfair. And in today’s inflationary environment, the timing is less than optimal.
NEW YORK – The student debt forgiveness scheme announced by US President Joe Biden last month can certainly alleviate many of the desperate conditions some borrowers face. But it will do so at a disproportionately high cost. Much of the money spent will go to people who do not really need it. Given that a college degree already confers a significant wage premium, those who never went to college and pay taxes may well perceive this aid as unfair. And in today’s inflationary environment, the timing is less than optimal.