A new report published by the Manhattan Institute states that as Democrats attempt to paint the picture that millennials are “drowning” in student debt which must be “forgiven,” most of them have none at all.
The analysis finds 66 percent of millennials actually have no student debt, “either because they did not attend college or did not acquire debt in the process,” says the report by Beth Akers, Manhattan Institute senior fellow.
The student debt crisis is overblown: most millennials are not drowning in student debt. 66% of millennials have no student debt at all. And those who do have debt tend to have modest burdens relative to their income. https://t.co/MHkgJ3Qzip via @BethAkers_
— Manhattan Institute (@ManhattanInst) October 16, 2019
“The typical graduate will have borrowed $28,500 in pursuit of a bachelor’s degree,” the report continues. “That can be repaid with monthly payments of $181 on a standard, 20-year repayment plan.”
Secondly, only 6 percent of student borrowers have more than $100,000 in debt. Most of these borrowers have graduate or professional degrees and often come from families with higher income.
“More than one-third of outstanding student debt is held by individuals who are themselves in the highest income quartile,” with individual income greater than $97,000, the report observes. “Typically, those in trouble are not the ones with high debt but those who never completed college – default rates are highest for those with less than $5,000 in debt.”
Thirdly, the report notes the mean income for all millennials – including those without college degrees – is $46,092:
Under the existing income-driven repayment programs for all federal student loans … borrowers with this level of income would never be required to pay more than $173 per month (4.5% of pretax income), regardless of how much they had borrowed.
“The typical millennial has no student debt,” Akers writes. “Even among those who pursued higher education and borrowed to fund it, a typical household with two college-educated workers has more than $100,000 in annual income and pays less than $400 monthly on their loans.”
Instead of loan forgiveness, Akers recommends that federal intervention “focus on the small subset of borrowers with unmanageable debt burdens and ensure that they still repay what they can afford. Those programs already exist.”
Continuing along the path of the Obama administration, which ultimately allowed more student loans to be “forgiven,” the Democrats’ plan contains a proposal that changes how loan payments for student borrowers are calculated based on income. Cooper observes:
Currently, borrowers in these plans pay an amount equal to 10% of their income above 150% of the poverty line (about $25,000 for a household of two). House Democrats would raise that threshold to 250% of the poverty line, slashing monthly payments for some borrowers and eliminating them for others.
As it stands now, student debt after 20 years of repayment is “forgiven.” Raising the threshold of the poverty line, however, means American taxpayers will be stuck with billions in student loan “forgiveness.”
In October 2018, Jason Delisle and Cody Christensen wrote at National Review the Democrats’ plan “would let borrowers out of loans they could afford to pay back.”
They explain that a typical student borrower has an income of about $35,000 and, currently, would pay $140 per month in loan repayment, with “forgiveness” after 20 years of repayment. An increase in the income exemption to 250 percent of the poverty line, however, “means the borrower’s initial payments would be just $39.”
While payments would grow as the borrower’s income increases, under the Democrats’ plan payments “would still be so low that they would barely cover the interest on the $30,000 loan,” the authors noted. “That would mean all of the original principal balance would have to be forgiven after 20 years of payments.”
Many Democrat presidential hopefuls claim college graduates are crushed by student debt that prevents them from getting ahead and stimulating the economy.
Both 2020 candidates Bernie Sanders and Elizabeth Warren have plans to cancel student debt.
Sanders’ proposal would eliminate all existing student loan debt in the country. His campaign website states, if elected, he will “cancel the entire $1.6 trillion in outstanding student debt for the 45 million borrowers who are weighed down by the crushing burden of student debt.”
Elizabeth Warren’s plan contains caps, but would still cancel $1.25 trillion in student debt for 42 million people. Her proposal would forgive $50,000 in student loan debt for every person with a household income of $100,000. Those whose households make between $100,000 and $250,000 would have a portion of their student debt forgiven.
In August, the Wall Street Journal editorial board minced no words in asserting American taxpayers are victims of a student loan “scam.” The board noted the New York Federal Reserve’s quarterly household debt survey released the week before showed more Americans are defaulting on their student loans.
The editors observed delinquent student loans have risen dramatically since 2012, when Barack Obama was president, and have overtaken delinquencies in credit card payments, auto loans, and mortgages.
During the Obama era, they noted, the Congressional Budget Office (CBO) “scored student loans as a government profit center by underestimating the growth in income-based repayment plans.”
Now, however, CBO predicts taxpayers will be on the hook for $306.7 billion over the next ten years.
Of course, with the influx of taxpayer funds to pick up the tab, the WSJ board points out income-based repayment plans “have also encouraged schools to raise prices and enroll students who probably won’t earn enough to pay off their loans,” knowing those students ultimately will be “forgiven” by taxpayers.
As it happens, “Americans who borrow more than they can repay typically default first on student loans,” the editors say. But, while defaults on mortgages and car loans have serious consequences, individuals who default on student loans “are encouraged to enroll in income-based repayment plans.”
The editorial board warns of substantial losses for American taxpayers due to the Obama-era repayment scheme that current Democrats plan to take to new heights.
“All of this is worth keeping in mind as Democrats promise to save taxpayers billions by taking over other private industries and expanding the cradle-to-grave entitlement state,” the board says.