The loan cancellation plan applies to individuals earning less than $125,000 per year, while those who paid for college using Pell Grants are eligible for a $20,000 cancellation. Biden also decided to extend the pause on federal student loan repayment to January 2023 and will permit borrowers with undergraduate loans to cap payments at 5% of monthly income.
However, as noted by RealClearPolitics reporter Philip Wegmann, staffers in Washington, D.C., are set for a major windfall from the commander-in-chief’s policy. At least 30 senior White House officials have outstanding student loan balances, according to financial disclosures obtained by Bloomberg earlier this year, representing one in five staffers required to file the documents.
Among the officials who collectively owe as much as $4.7 million are White House Press Secretary Karine Jean-Pierre and National Economic Council Deputy Director Bharat Ramamurti, while one legislative aide alone owes between $500,000 and $1 million. Both Jean-Pierre and Ramamurti, however, earn more than the $125,000 threshold established by the debt elimination policy.
Meanwhile, a report from AdvisorSmith found that residents of Washington, D.C., carry an average student loan balance of $55,077 — the highest of any other part of the country. With average balances of $43,219 and $39,472, residents of nearby Maryland and Virginia place second and fourth in the nation for student debt.
Another recent analysis from Daily Caller News Foundation investigative reporter Gabe Kaminsky showed that 13 Democratic members of Congress who have espoused some version of federal student debt cancellation policy hold up to $1.5 million in loans.
Rep. Alexandria Ocasio-Cortez (D-NY), for instance, owes up to $50,000 and said at the end of last year that she owes $17,000. “I’m 32 years old now,” the lawmaker remarked. “I have over $17,000 in student loan debt, and I didn’t go to graduate school because I knew that getting another degree would drown me in debt that I would never be able to surpass. This is unacceptable.”
Members of the House of Representatives earn an annual salary of $174,000 — provoking criticism for failure to repay their obligations in a timely manner. Indeed, one-third of student debt is owed by the wealthiest 20% of households, according to data from the Brookings Institution, while only 8% is owed by the bottom 20% — partly because more degrees are often necessary for the most lucrative professions.
The Biden administration’s student loan cancellation plan is similarly regressive. Eliminating $10,000 of student loans per borrower would cost $298 billion in 2022 and a total of $329 billion by 2031 if the policy is renewed each year, according to a nonpartisan analysis from the University of Pennsylvania’s Wharton School, which also found that 42% of the benefit would impact Americans earning more than $82,400 per year.
The Wharton analysts predicted that a permanent loan cancellation announcement could prompt students to “eventually reorganize their financing toward additional borrowing.” Although the policy could increase access among students who would not otherwise be able to afford higher-level degrees, universities themselves could capture the value “in the form of higher prices” as they raise tuition.