Ross Clark Ross Clark

The problem with Biden’s student debt plan

In Europe it is handouts to help pay our energy bills – even for people who could easily afford to pay them. In the US, it is student debts being written off. With remarkable speed the West is emerging into a new age of big – no, make that huge – paternalistic government.

Today, Joe Biden announced that graduates who earn less than $125,000 a year, and who live in a household whose joint income is less than $250,000, will have $20,000 worth of student debt written off. For those who work in the non-profit sector, the military, or federal or local government, the write-off will be 100 per cent. Graduates have already enjoyed a pause in their repayments since the pandemic, with repayments (for those whose loans will not be written off) due to recommence in January.

We are in an age in which western governments are not even trying to balance their books

Who wouldn’t want to have their student loan written off? For graduates of a certain age in Britain, higher education came for free in the first place. Many of us never experienced the choice of whether to seek a degree and load ourselves up with debt, or whether to go, debt-free straight into the job market and suffer the handicap of not having a degree. There is an argument to be made that student loans are part of the inter-generational unfairness which has seen the over-50s grow rich on property wealth while younger people face vastly higher living costs than did their parents at their age.

Yet there is something even more unfair about a sudden decision to write-off existing debt (whether student debt or any other kind). What about the US graduates who have worked hard and denied themselves luxuries in order to pay off their debts? They now face the realisation that they been less prudent, and spent their money on enjoying themselves rather than paying the interest on their loans, their debts would have been paid off anyway.

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