U.S. Rep. Bonamici no friend of working families

By William MacKenzie,

U.S. Rep. Suzanne Bonamici, D-OR, is thrilled with President Biden’s actions cancelling student loan debt. She shouldn’t be.

Even though she has a bachelor’s degree and a law degree from the University of Oregon, it’s clear she’s no economist. And even though she’s a member of the House Progressive Caucus, her support for student loan forgiveness suggests she’s no friend of working families either.

That’s because, for one, the billions in student debt aren’t, in fact, being cancelled. The loans will still be paid off. The issue is by whom?

“The idea that the government is footing the bill for this policy is a bit misleading,” the American Institute for Economic Research points out.   “The cost of the program does not fall on the government. It falls on those who miss out on expenditures that would have otherwise occurred, those who pay higher taxes as a result of the program, those who pay higher interest rates or are crowded out due to additional government borrowing, or those who see the purchasing power of their dollars reduced more than usual.”

Even though the Supreme Court ruled that the Biden administration overstepped its authority in 2022 when it announced that it would cancel up to $400 billion in student loans, Biden has since been rolling out a series of debt forgiveness alternatives using a variety of executive actions.

Biden’s ingenuity in coming up with more loan repayment exceptions seems to have no bounds.

On April 8, 2024, the White House announced an initiative that would:

• forgive interest balances built up to date for 25 million borrowers, with 23 million likely to have all of their balance growth forgiven.
• automatically cancel debt for borrowers eligible for loan forgiveness under several loan programs.
• cancel student debt for borrowers who entered repayment over 20 years ago.
• cancel student debt for loans associated with institutions or programs that lost their eligibility to participate in the Federal student aid program or were denied recertification because they cheated or took advantage of students.
• cancel student debt for borrowers experiencing hardship paying back their loans.

While there’s no question student debt has become a burden for many Americans, Biden’s escalating efforts to relieve borrowers of obligations to repay student loans will add to the government’s annual deficits and the national debt. In other words, current student loan holders may escape repayment, but future taxpayers will have to pay the bill since Biden isn’t proposing any new revenue collections to cover the cost.

On April 11, the University of Pennsylvania’s Penn Wharton Budget Model estimated that Biden’s April 8 plans, if they are implemented, will cost the government $84 billion, in addition to the $475 billion that Penn Wharton previously estimated for Biden’s plans.

Rep. Bonamici must not care about that.

Biden’s student debt forgiveness policies also raise serious questions about fairness. For example, according to Penn Wharton, eliminating student debt for borrowers in repayment for more than 20 years (or for more than 25 years with graduate debt) will provide debt relief for about 750,000 individuals residing in households that, on average, earn $312,977 in annual household income.

There’s also inequity in Biden’s plan to cancel up to $20,000 in interest for borrowers who have accrued or capitalized interest on their loans since entering repayment.  Low and middle-income borrowers enrolled in the SAVE Plan or other income-driven repayment (IDR) plans would be eligible for their entire interest balance since entering repayment to be cancelled if they make:

• $120,000 or less per year individually or as married filing separately
• $180,000 or less per year as a head of household, or
• $240,000 or less per year as married borrowers who file joint taxes.

Real median personal income in the United States was only $40,480 and the national median household income was just $74,580 in 2022. In other words, many college educated borrowers in Bonamici’s district who are eligible for relief under Biden’s plan are hardly struggling. And despite her assertion that she’s “standing up for working families,” many of her constituents with much lower incomes will end up covering the bills of their better-off neighbors.

Then, of course, a lot of Bonamici’s responsible working family constituents have probably made sacrifices to pay down their student loans, foregoing vacations, nice cars and restaurant meals. They will get no benefits at all from Bonamici’s generosity.

Tough beans for them, I guess.