With President Joe Biden within the White Home, progressives are pushing for common pupil mortgage forgiveness. New information from the Division of Schooling supplies a wonderful snapshot of how badly focused pupil mortgage forgiveness could be. This new information provides us probably the most detailed view into the roughly $86 billion in pupil loans taken out by college students who graduated and began repaying their loans in 2016-17 and 2017-18.

The information clarify that pupil mortgage forgiveness supplies huge windfalls to the well-off. The sector with probably the most mortgage forgiveness per borrower is dentistry, the place the common borrower would offload $250,000 of debt onto taxpayers. Debtors within the area of drugs would have a mean of $174,000 forgiven. And debtors in legislation would have a mean of $119,000 forgiven.

Progressives typically painting themselves as combating in opposition to makes an attempt by the wealthy and highly effective to hijack public coverage to complement themselves at taxpayers’ expense. So why, within the identify of combating for the oppressed, are they attempting to ship well-compensated dentists, medical doctors, and legal professionals six-figure checks? Whereas there are definitely dentists, medical medical doctors, and legal professionals who’re fighting debt, many others are lavishly compensated and might afford to repay their loans.

Nor are these fields uncommon. Throughout all tutorial fields, the standard borrower on this cohort who earned an Affiliate’s diploma would have $15,000 in pupil loans forgiven. The standard borrower who earned a Grasp’s diploma would have $45,000 in debt forgiven, though these with a Grasp’s diploma usually have beginning salaries $25,000 greater. Graduate college students account for under 19 p.c of the levels awarded however 48 p.c of the debt, and would due to this fact disproportionately profit from mortgage forgiveness.

Some various Democratic proposals have tried to mood the push for complete mortgage forgiveness by capping the quantity that’s forgiven. For instance, Sens. Elizabeth Warren (D-Mass.) and Chuck Schumer (D.-N.Y.) known as for a restrict of $50,000 per pupil. This may scale back however not get rid of the mistargeting. Forgiving $50,000 of pupil mortgage debt for a graduate from Harvard legislation is best than forgiving their common debt of $143,000, however it’s nonetheless $50,000 an excessive amount of. Do progressives actually assume that offering Harvard legislation graduates with a $50,000 reward from taxpayers is a justified and urgent use of taxpayer {dollars}?

The Biden administration ought to keep away from these common approaches to mortgage forgiveness as a result of all of them endure from the identical deadly flaw, particularly, a mismatch between the issue—unaffordable debt, which is concentrated amongst a subset of debtors—and the proposed treatment, common mortgage forgiveness (with or with out a cap).

What needs to be performed as an alternative of common forgiveness? There may be already an current pupil mortgage reimbursement program that may clear up—not mitigate, not tackle, however clear up—the issue of unaffordable pupil loans. Specifically, the Revised Pay As You Earn Compensation Plan (REPAYE). Below REPAYE, college students pay 10 p.c of their discretionary earnings, making certain that funds are at all times inexpensive. If a graduate loses their job, their mortgage cost drops to $0. Once they begin working once more, their mortgage funds resume and are based mostly on their new wage. Any remaining stability after 20 to 25 years of reimbursement is forgiven.

REPAYE is just not excellent. It’s far too beneficiant. Given the low cost charge of 10 p.c, an excessive amount of earnings is exempt (discretionary earnings begins at 150 p.c of the poverty line) leading to too many college students not even protecting the curiosity on their loans. Given such low funds and beneficiant forgiveness provisions, the Congressional Price range Workplace estimates that in current worth phrases, for each greenback loaned out and repaid by way of REPAYE and comparable packages, 43 cents won’t ever be repaid. Thus, we urge Congress to amend REPAYE by adjusting the edge for discretionary earnings, the cost charge, and eliminating the forgiveness provisions.

However even with its flaws, REPAYE remains to be the very best device accessible for the incoming Biden administration. Making REPAYE the default pupil mortgage reimbursement plan for all college students provides the Biden administration a golden alternative to unravel the scholar mortgage disaster, assist struggling college students, advance rational public coverage, and to do all of it with out sending six-figure checks to dentists, medical medical doctors, and legal professionals.