Student loan debt is so often described as a “crisis,” with anecdotes about crushing debt burdens seemingly easy to find, that saying so has become cliché. Responding to such cries, President Biden has pushed the bounds of his powers to forgive federally backed higher-education debt. Some even believe that university education should be free, or near-free, as it is in many other countries .
How does this small group accumulate such large debt balances? It turns out a huge proportion of outstanding student debt — a majority, according to— is held by households in which the highest level of education is a master’s degree or higher — that is, people who paid for more education. Americans with professional and doctorate degrees are only 3 percent of the population but hold a vastly disproportionate share of the total.
So, is student debt a crisis? It depends on who’s in debt. People who complete their degrees, particularly if they didn’t come from poverty, tend to pay off their debt over time. That makes sense: In general, higher education is worth the cost. A typical worker with a bachelor’s degreeForgiving loans, meanwhile, results in those who didn’t go to college subsidizing the tuition costs of those who did. That doesn’t mean it’s never a good idea.
President Biden’s Save plan, whose enrollees were treated to an additional $7.4 billion in debt cancellation this month, gestures at this principle with its focus on income-based repayment. And, such as wiping out debt that has been held for more than 20 or 25 years while giving enrollees who borrowed relatively small amounts of money a chance to have debt canceled sooner,is set at a very comfortable $125,000 for single people and $250,000 for married couples and heads of household, andback.
There are ways to adjust the program so that it helps those who need it most while costing the public less: for instance, upping the share of income paid by better-off borrowers, relative to the share paid by those who earn less — similar to how progressive income taxation works. Most important, policymakers should focus on a connected, more acute crisis: