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**SEPTEMBER 28, 2022**
Kuttner on TAP
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**** The Cost of Biden's Student Debt
Cancellation
At $15 billion a year, it's a good deal for students and for the
economy, but it only begins reform of how we pay for higher education.
The Republicans have made a huge deal of the fact that the Congressional
Budget Office
has
"scored" the cost of President Biden's student debt cancellation at
$420 billion. But though CBO usually calculates the ten-year cost of an
outlay, this widely quoted figure, oddly, is for 30 years. Divide by 30
and the average annual cost is less than $15 billion a year-against a
GDP of about $20 trillion, or about one quarter of 1 percent of the
federal budget.
And, as CBO admits, this scoring omits the benefits. Former students
relieved of this debt burden will have more available money to purchase
homes, start businesses, and otherwise thrive economically.
Calculating benefits as well as costs of federal outlays is in bad odor,
because the right uses so-called "dynamic scoring" to claim that tax
cuts pay for themselves (they never do). But social outlays do have
actual benefits. They are impossible to calculate with precision, but
their benefits are obviously more than zero. As CBO admitted in its
letter to Republican Sen. Richard Burr and Rep. Virginia Foxx estimating
projected budget costs, "The estimates presented here do not include any
effects of the actions."
Biden's debt relief program was particularly well targeted. The extra
relief-up to $20,000 of debt cancelation for Pell grant recipients
(about 65 percent of those eligible) rather than the general limit of
$10,000-will be a godsend for low-income students and former students
saddled with debt.
There is, however, a dire problem that Biden's debt cancellation
problem doesn't solve. It only addresses debt incurred in the past.
For students beginning college, the debt clock starts ticking all over
again.
Bernie Sanders
has proposed that higher education at public universities should be free
for students from families making less than $125,000 a year and paid on
a sliding scale above that. To qualify for the federal contribution,
state legislatures would have to pay a set minimum. The federal cost
would be covered by a tax on financial transactions.
Kevin Carey
,
in a recent article in Slate, proposes a variant on Biden's proposal
for free community college. Under Carey's plan, the federal government
would subsidize $10,000 per student at four-year universities as well as
two-year colleges. In exchange, institutions and presumably state
legislatures would agree to an affordable tuition schedule. Carey
proposes that families earning less than the median household
income-currently about $70,000-would be charged $0 tuition. Those
earning more would pay modest tuition, on a sliding scale.
These and other ideas should be on the table. Biden's debt
cancellation is the beginning of reform, not the end.
~ ROBERT KUTTNER
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