National View: Student-loan bailout makes no fiscal sense

From the column: "It is being sold as a device to aid the less fortunate, but it is really a transfer of tax dollars from lower-income earners to higher-income earners."

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It is difficult to manipulate data enough to justify the White House’s student-loan handout. Simply put, the numbers don’t add up.

The claim is that nearly all graduates are under crushing levels of inescapable debt that will burden them for years, if not the rest of their lives. Therefore, widespread “forgiveness” is necessary to save these borrowers. Yet even a cursory review of the numbers is enough to blow holes below the waterline of the White House’s student-loan handout.

First and foremost, debt forgiveness is a euphemism; debt can only be truly forgiven by the creditor. All a third party, like the federal government, can do is transfer the debt. In this case, the White House is trying to transfer that student-loan debt to you, the taxpayer, to bail out the borrowers.

So, who are these borrowers? They are, on average, demonstrably better off than the average American. More than half the student-loan debt is held by households with graduate degrees, including lawyers, doctors, and many other high-earning professionals. The median annual income of professional degree holders is about $97,000, almost twice the median worker’s annual income. Earners with a college degree or higher have seen their wages keeping up with inflation since the pandemic, while the average worker has seen a real-wage decline of about 5%.

And college graduates have much better prospects of finding one of those higher-paying jobs. The unemployment rate for college graduates is down to 1.9%; there are only a few times in history when it has been below that. There are 3.7 million more college graduates working today than in February 2020, before the pandemic. A student-loan handout would have been wrong before the pandemic. It’s egregious now.


The White House’s student-loan handout is a solution in search of a problem. That is not to say higher education and the student-loan market are problem-free. Far from it. It is laughable that the idea that bailing out borrowers with almost no restrictions would address any structural concerns with higher-education financing. Rather, this unconstitutional program would transfer up to $40,000 of debt from households making as much as a quarter million dollars a year.

The rationale behind this transfer of student-loan debt does not even pass the smell test. It is being sold as a device to aid the less fortunate, but it is really a transfer of tax dollars from lower-income earners to higher-income earners. If the higher-income earners need this handout, then surely the lower-income earners need an even larger handout. Instead, those with less would be forced to give to those with more.

How much more? The pause on interest alone, which has been in place for more than two and a half years, would cost taxpayers $170 billion before any “forgiveness” even takes place. Meanwhile, the White House hasn’t even bothered to calculate the expected cost of its student-loan handout, which multiple empirical models peg at more than $500 billion.

The White House’s plan also reduces how much new borrowers would have to repay and guarantees future handouts. The cost to taxpayers would only escalate as time passes, especially since colleges and universities now have an incentive to charge even higher tuition, with the knowledge that larger loan balances would be assumed by taxpayers.

President Joe Biden’s student-loan handout is an incredibly inefficient use of tax dollars and is entirely unnecessary. High-income earners should not be bailed out of debt into which they willingly went to fund educational opportunities that enabled them to earn their higher income.

Despite the rhetoric, the White House’s plan does nothing to make higher education more affordable. Instead, it incentivizes irresponsible behavior on the part of borrowers, lenders, and schools — precisely the opposite of its claims. But no matter what rhetoric or euphemisms are used, two and two will never make five, and a student-loan bailout will never make fiscal sense.

E.J. Antoni is a research fellow for regional economics in the Center for Data Analysis at The Heritage Foundation (, a conservative think tank in Washington, D.C. He also is a senior fellow at the Committee to Unleash Prosperity (

EJ Antoni.jpg
E.J. Antoni

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