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Experts analyze GOP governors’ letter to Biden on student-loan forgiveness

Glenn Youngkin speaks outside at a rally.
Crixell Matthews
Gov. Glenn Youngkin signed on to a letter from Republican governors criticizing President Joe Biden's plan to relieve some kinds of federal student loans. (File photo: Crixell Matthews)

Earlier this week, more than 20 Republican governors signed onto a letter calling for President Joe Biden to rescind his plan to relieve certain kinds of federal student-loan debt.

On Wednesday, Gov. Glenn Youngkin’s signature was added. According to his spokesperson, Macaulay Porter, there was a delay in processing his signature for the letter.

VPM News asked some experts to unpack a couple of the claims included in the letter.

Claim No. 1: Biden’s loan forgiveness program will “encourage more student borrowing, incentivize higher tuition rates and drive up inflation even further.”

David Feldman — an economics professor at William & Mary — said the likelihood that the plan will cause a burst of inflation is “vanishingly small, zero.” He said the idea that the policy will worsen inflation “is very poorly supported in theory and not in evidence at all” because the impact of the loan forgiveness on how much people currently spend is very low.

Also, he points out: “The same claim can be made about any public spending program. Does SNAP contribute to inflation? How about the defense department? I mean, every bit of federal spending could be said to be just as causally connected to inflation as this relatively small debt forgiveness. So, I think the inflation argument is a canard.”

As for incentivizing higher tuition rates, Feldman said the letter attempts to invoke The Bennett Hypothesis, which holds that colleges will raise tuition when financial aid is increased.

Feldman said, “ the best studies that pay good attention to statistical methods have shown that there is very little to zero impact [on tuition rates after] an increase in federal subsidy. And this isn’t even an increase in federal subsidy, this is just the wiping out of debt. But an increase in federal subsidy, like adding to the Pell Grant or allowing students to borrow more … the evidence that this contributes to a tuition increase — the list price printed in the catalog — is concentrated in one sector of the higher education system and that’s the for-profits.

“There’s very little credible evidence that allowing students to borrow more or adding to the Pell Grant does anything to the pricing of public universities.”

Claim No. 2: “Shifting the burden of debt from the wealthy to working Americans has a regressive impact that harms lower-income families.”

Feldman said this claim is flawed, because the wealthiest Americans — those in the top 5% of earners — will not benefit from Biden’s plan. Meanwhile, those who will benefit are the one-third of borrowers nationwide who have student loan debts less than $10,000.

“Who are those people who have those relatively small amounts of debt? These are not the doctors and the lawyers and the business professors,” Feldman said. “Overwhelmingly, these are the people who were induced to try college. They tried it for a semester or a year, borrowed $9,000 in the attempt, decided it wasn’t for them, and left college with no degree, no credential and $10,000 in debt. These are people whose financial lives [have been] up-ended and do not have many other avenues for dealing with this.”

Feldman also pointed out that the debt picture looks much different than it did 30 or 40 years ago. The “steady retreat of the states from funding their public institutions” has pushed more students — even those attending community colleges — to have to borrow in ways that they did not have to in the past, Feldman said.

James Murphy, senior policy analyst with Education Reform Now, points out that while the state of Virginia covered 77% of the cost of a public higher education in 2001, it covered 48% in 2019. 

“Earlier generations went to college at a time when states invested a lot more in public, higher education,” Murphy said.

Megan Pauly covers education and health care issues in the greater Richmond region.