Top 20% Gets 6x More Benefits from Student Debt Cancellation than Bottom 20%, New Study Finds

From Sen. Elizabeth Warren to Rep. Alexandria Ocasio-Cortez, some of the most prominent progressive politicians in the country are pushing hard for widespread student debt cancelation. So, it’s fascinating to see a new study show that forcing taxpayers to pay down the roughly $1.5 trillion in government-held student debt is not a “progressive” policy by any stretch.

Note that just one in three American adults over age 25 actually has a bachelor’s degree. This population, naturally, holds almost all student debt. Yet college graduates typically make 85 percent more than those with only a high school diploma and earn roughly $1 million more over a lifetime. 

So any government policy that forces taxpayers to pay off loans held by a relatively well-off slice of society is actually regressive, meaning it disproportionately helps the wealthy. You don’t have to take my word for it—this is the finding of a new University of Chicago study.

Economists Sylvain Catherine and Constantine Yannelis crunched the numbers to conclude that full student debt cancellation would be a “highly regressive policy” and award $192 billion to the top 20 percent of income earners, yet just $29 billion to the bottom 20 percent. 

The study also examines other proposals to have taxpayers pay off $10,000 or $50,000 in debt per person, rather than all debt. It finds similarly regressive outcomes for these proposals as well.

“Outstanding student debt is inversely correlated with economic hardship,” study co-author Sylvain Catherine writes. “So it is difficult to design a forgiveness policy that does not accentuate inequality.”

This finding is not an outlier.

In fact, other research from left-leaning institutions like the Urban Institute has reached the same conclusion. So, we’re left with the simple fact that one of the Democratic Party’s top agenda items is a taxpayer-financed handout to the wealthy. And, of course, student debt cancellation ignores the real reason college is so expensive in the first place. There is no such thing as a just and fair method of exercising the tremendous power that interventionism puts into the hands of the legislature and the executive.

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