Sen. Elizabeth Warren likes to describe herself as someone who sides with working people. For example, in a recent New York Times op-ed, the Massachusetts Democrat warns, correctly, that her party is headed for disaster in this year’s midterm elections. She then urges President Joe Biden “to use every tool of the presidency to deliver for”—you guessed it—”working people.” This is the sort of thing that is designed to appeal to Biden’s abiding sense that he’s just a regular guy whose mission in life is to make life easier for other regular people. He’s just an average Joe trying to help all the other average joes.
But Warren’s first suggestion is a policy that would disproportionately benefit a group of people who are, economically speaking, already doing comparatively well. And Biden increasingly appears poised to act on that policy. I’m referring, of course, to canceling large amounts of student loan debt.
At a private meeting with the Congressional Hispanic Caucus yesterday, Biden was reportedly quite receptive to the idea of canceling some student debt, according to NBC News. Some reports suggest the administration is readying a plan to cancel $10,000 of student debt per borrower. But Senate Majority Leader Chuck Schumer (D–N.Y.) claims the figure could be higher. “We’re getting closer and closer and closer on student loans. I’ve been working relentlessly on the president and his staff, and they seem more open to it now than ever before,” he said this week. “There’s nothing done yet, but I am really hopeful that the goal that we have had, $50,000 of student loans canceled, is getting more and more likely.”
There may be other, smaller actions in the meantime, like this morning’s announcement that the Biden administration will cancel $238 million worth of cosmetology school debt, but Schumer was laying out the end goal: canceling $50,000 of student loan debt per borrower.
First, it’s worth noting that people with college degrees are more likely to both be employed and, on average, are better paid than those who never attended college. People who attend college are also more likely to come from comparatively affluent households in the first place.
Second, it’s worth asking: Who has $50,000 worth of school loans? Not, for the most part, struggling dropouts from state schools. No, large student loan values are heavily associated with professional schools that produce graduates who, on average, go on to be fairly well-compensated.
The single largest source of student loan debt is MBA programs, as Brookings Institution Senior Fellow Adam Looney has noted, and MBA grads average more than $73,000 in earnings their first year out of school. “The five degrees responsible for the most student debt are: MBA, JD, BA in business, BS in nursing, and MD,” Looney wrote in 2020. “That’s one reason why the top 20 percent of earners owe 35 percent of the debt, and why most debt is owed by well-educated individuals.”
Technically, it’s true that well-paid professional school graduates fall into the category of “working people.” But they are not the sort of working people Warren wants you to think of when she uses those words.
What Warren wants, and what Biden appears to be considering, is a massive program of government aid that would disproportionately benefit doctors, lawyers, well-paid medical specialists, and comfortably salaried individuals with advanced business degrees.
But for some reason, you don’t hear Warren and Biden talking about their plan to give huge amounts of money to corporate lawyers and junior associates at hedge funds.
How much money would a program like this cost? Cost, of course, is slightly tricky to define here, since a student loan forgiveness program would not spend money so much as fail to collect it. But a program to forgive $50,000 per borrower would come in at around $950 billion, according to the Committee for a Responsible Federal Budget. This would be in addition to the cost of the current pause on student loan repayment, which has already cost more than $100 billion.
Warren’s pitch for a presidential program to help “working people” is a trillion-dollar bailout for the upper-middle class. They’re just looking out for the little guy.
Here’s another question worth asking that no one involved seems to want answered: Would a unilateral program of debt forgiveness like the one that is apparently under discussion be legal?
Actually, someone did answer that question. Specifically, that question was answered in 2021 by the Office of the General Counsel at the U.S. Department of Education. Lawyers for sprawling government agencies often like to defend the broad powers of their departments, declaring what they legally can do rather than what they legally can’t. So it is noteworthy that the lawyers for the Education Department found that the secretary of education “does not have statutory authority to provide blanket or mass cancellation, compromise, discharge, or forgiveness of student loan principal balances, and/or to materially modify the repayment amounts or terms thereof, whether due to the COVID-19 pandemic or for any other reason.” That sounds like a pretty firm no.
So it’s not just a plan to give huge amounts of money to corporate lawyers and junior associates at hedge funds. It’s an illegal plan to give huge amounts of money to corporate lawyers and junior associates at hedge funds.
In an interview with Politico this week, Warren recycled some of the “delivery” language of her Times op-ed. “If we do deliver,” she said, “if we can get some tangible results that touch people’s lives, then we can go to the polls in November with our heads held high.”
Illegally funneling money to a well-paid, well-off cohort that just happens to vote increasingly for Democrats? Now that’s something a champion of working people can really feel good about.