Amid legal uncertainty surrounding President Biden’s plan to forgive up to $400 billion in student loans over the next 30 years, a new survey by the education magazine Intelligent.com provides a revealing look at how many Americans plan to spend their extra savings.
Published in October, the survey asked 1,250 individuals who have applied or plan to apply for student loan forgiveness how they plan to use the extra money they will receive each month. The answers they provided call into question whether such a federal program is wise or necessary for the vast majority of Americans.
One of the more striking findings in the survey is that a full 73 percent of respondents said they are likely to spend any extra money on non-essentials including gifts (42 percent), gaming systems (36 percent), drugs and alcohol (28 percent) and even gambling (28 percent). Other nonessentials include investing in the stock market (43 percent), vacation (46 percent) and restaurants (46 percent).
These answers fly in the face of some of the most common arguments made for student loan forgiveness, such as that recipients will use extra monthly savings to pay for necessities like food and shelter, and that broad student debt cancelation will help reduce inequality. If most program recipients do in fact plan to spend their extra savings on non-essentials, many of the outcomes debt forgiveness advocates desire seem unlikely to come to fruition. The promise of improved outcomes rests on the premise that people will use their savings wisely. Unfortunately, there’s no guarantee that this will occur.
This data reveals a significant shortcoming of Biden’s plan for student loan forgiveness. No accountability mechanism within the program would require good stewardship of accumulated savings. While some recipients will still use this extra money wisely, others may not. That inconsistency presents a problem given that 100 percent of the cost of this program falls on American taxpayers, many of whom didn’t attend college in the first place and come from low-income backgrounds. In this way, the program, far from being a progressive money saver, is actually a regressive loser that will likely result in a wealth transfer from the poor to the rich.
Other survey findings are equally concerning. For instance, 73 percent of respondents admitted that purchasing non-essential goods with program savings was “wrong.” Yet, this same group of people still plans to use at least some of their savings on non-essentials. In addition, 77 percent of respondents said of their spending habits, “it would be possible for them to spend less and save more money.” 4 out of 10 respondents also admitted that their student loans haven’t actually negatively affected their lives. Perhaps this is because individuals with an annual income of up to $125,000, or $250,000 for joint-income households, may still qualify for debt cancelation. A report published last year found that 65 percent of all student debt was held by Americans with an income greater than the national average.
These findings should prompt immediate questions for the Biden Administration, which only seems concerned with appealing a series of recent court case losses.
Of course, none of this is to say there aren’t those Americans who may benefit from some variation of student debt forgiveness. Some Americans could certainly use extra money to help pay for essential goods and services like transportation, rent and groceries. The question is whether Biden’s current debt cancelation program is best suited to serve all Americans’ needs. Based on the answers provided in this Intelligent.com survey, the answer is no.
The Biden Administration should rethink its student loan forgiveness plan. Some Americans may indeed need financial assistance, but this program is not the most appropriate or equitable way to provide it. Broad student debt forgiveness will only serve one subset of Americans at the expense of others, many of whom do not even possess a college education. Moreover, taxpayers will be left to pick up the tab at a time when consumer prices remain high and economic uncertainty abounds. The best thing the Biden Administration can do for Americans is to demonstrate fiscal restraint and help end inflation. Perhaps then Americans will have more money to put into savings and use to begin paying off their college debt.