US President Joe Biden decided on a program to eliminate debt for students in the US, with the aim of allowing them to start life without such a heavy millstone around their necks. This is a populist step, of course, which many economists have criticized, when they explain that there are no “free meals” in the economy – someone else will finance it, and the meaning is of course the entire American public: the American taxpayer.
But another problem with the program, whose cost is estimated at 400 billion dollars, is that quite a few American students will miss out on the benefit. According to the American Ministry of Education, about 20% of students, or 7 million young men and women, are expected not to take advantage of the benefit.
Why actually? In the US, they explain that the requirement for students to submit an application in order to receive the waiver may harm these young people, because many young people can mistakenly think that they are not eligible. So, it is true, the White House emphasizes that submitting the application, which is expected to be possible within a few days, will be simple and easy to do, but by the nature of Bureaucratic things that require human action and do not happen automatically – precisely those who need them more sometimes miss it.
Who is entitled to a debt waiver?
There are too many examples where people mistakenly thought they weren’t entitled to something, but actually were, and ended up leaving money on the table – and that’s what’s likely to happen here as well. In practice, under Biden’s plan, most young people with federal student debt qualify for some kind of waiver. Young people who did not receive a federal aid grant for undergraduate studies (a grant called a Pell Grant in the US) are entitled to a debt waiver of up to $10,000, and students from a weak status who received the federal aid are entitled to a waiver of double the amount of $20,000
A socialist policy that will accidentally become regressive? (meaning the strong will receive it and the weak will not)
Students may also not apply because they mistakenly think they are earning too much. The program is limited to students who earn less than $125,000, or to married couples who together earned less than $250,000 in 2020 or 2021. It is likely that the vast majority of students in the US earn less than these amounts, as well as people with bachelor’s degrees and even master’s degrees will probably still be entitled to it at this point in their lives.
In the US, there are already those who say that precisely people who earn an annual salary of 124 thousand dollars (meaning just below the threshold and are therefore eligible) may submit the application for a waiver of the loan compared to those who earn an annual salary of only 30 thousand who will not submit the application.
Another problem that may arise is students whose contact methods have changed. People who have changed their email address, residential address or phone number. In such a case, if the contact information is not updated in the government systems, the US government may simply not be able to get hold of those students.
It is also interesting to note that students who are ‘on the border’ between eligible and non-eligible can also submit the application. Will they do it? Not sure. Although they have nothing to lose. After all, at most they will receive a negative answer and will not be eligible.
In any case, if indeed the weaker ones do not submit the applications, if because they are busy making money and surviving, if because they think they are not entitled to cancel the loan, etc. – the result will be that Biden’s socialist policy will actually be regressive, meaning that the strong take advantage of the benefit while the weak do not .
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