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The vast majority of the student loan debt relief will go to Americans on the lower end of the income scale. By one independent estimate, 75% of the relief will go to households in the bottom 60% by income.
Some borrowers with incomes well above that of the median American household qualify for student loan forgiveness.
A TV ad trolled President Joe Biden by using actors to portray blue-collar workers who, insincerely, sang the praises of his student loan debt forgiveness plan.
"Biden’s plan to pay other people’s college loans using my tax dollars is a great idea," a waitress says with mock enthusiasm.
"Want to be a struggling artist?" a mechanic says. "College is on me."
The ad, which was posted to YouTube Aug. 26, ends with a narrator repeating words that appear on the screen:
"Tell Congress, stop Biden’s bailout for rich kids."
Some borrowers who have incomes well above the median household income in America do qualify for Biden’s debt relief.
But the vast majority of the relief is concentrated on borrowers with lower incomes, according to independent estimates.
Student debt is the largest source of nonmortgage debt owed by families, the latest Federal Reserve Survey of Consumer Finances, released in 2020, shows.
Under Biden’s plan, $10,000 of federal student loan debt will be waived for individuals earning less than $125,000 per year or for couples earning less than $250,000; an additional $10,000 will be waived for people falling under those income thresholds who have also received Pell Grants, which serve low-income Americans.
Meanwhile, there are questions about whether Biden’s plan would hold up in court.
The minute-long attack ad is from American Action Network, a conservative, nonprofit advocacy organization whose leadership includes former elected officials who are Republicans.
To back up the ad’s claim about a bailout of the rich, network spokesperson Calvin Moore pointed to the median household income in America which, according to the latest Census Bureau figures, was $67,521 in 2020, and noting that the $250,000 income cap in Biden’s plan is nearly four times higher. Moore also cited a Washington Post editorial that said Biden’s plan subsidizes "the education debt of people with valuable degrees," including "white-collar professionals with high future salaries."
The income caps in Biden’s plan make borrowers with incomes well above the median eligible for relief. But that doesn’t make it a bailout of the rich.
The White House estimated that, among borrowers who are no longer in school, 87% of relief dollars will go to those earning less than $75,000 a year. The Education Department told us it had to deduce the income of many borrowers using Census data and statistical models. With any model, there’s going to be uncertainty.
Two independent estimates show student debt forgiveness mostly impacts on people with lower incomes.
The University of Pennsylvania’s Penn Wharton Budget Model, in an updated assessment after Biden’s plan was released, estimated that about 74% of the debt relief will go to American households in the bottom 60% by income, or those making less than $82,400 a year.
The assessment estimates that 4.7% of the relief will go to households earning between $141,096 and $212,209; just less than 1% will go to those earning between $212,209 and $321,699.
That roughly squares with a Federal Reserve Bank of New York analysis from April. It estimated that $10,000 in relief combined with a $75,000 income cap gave more than 80% of the benefits to people in neighborhoods where incomes were less than $78,000 a year.
Those findings comport with an open letter sent to Biden in January 2021 by 54 scholars who study student debt. The letter says debt cancellation would disproportionately benefit students who have lower-income jobs after college.
Student debt expert Mark Kantrowitz told PolitiFact that with the Biden plan’s focus on Pell Grant recipients, most of the people eligible for the debt relief are from lower-income families.
He estimated that, based on the latest federal figures available, 94% of undergraduate students who received a Pell Grant in 2015-16 had an annual family adjusted gross income of less than $60,000.
American Action Network claimed that Biden's student debt forgiveness plan is a "bailout for rich kids."
Some borrowers with incomes well above that of the median American household qualify for the debt relief.
But the vast majority of student loan forgiveness will go to people on the lower end of the income scale. By one independent estimate, 75% of the debt relief will go to households in the bottom 60% by income.
The claim contains an element of truth but ignores critical facts that would give a different impression — our definition of Mostly False.
YouTube, American Action Network "Tell Congress: Stop Biden's Bailout for Rich Kids" post, Aug. 26, 2022
American Action Network, "AAN Launches National Ad Campaign To Stop Biden’s Ivy League Bailout," Aug. 26, 2022
Email, American Action Network spokesperson Calvin Moore, Aug. 28, 2022
Email, White House spokesperson Abdullah Hasan, Aug. 30, 2022
Brookings Institution, "Putting student loan forgiveness in perspective: How costly is it and who benefits?", Feb. 12, 2021
House Budget Committee Republicans, "What They Are Saying: Biden’s Student Loan Cancellation is a Giveaway to the Wealthy, Increases Inflation, Adds Hundreds of Billions to the Taxpayers’ Tab," Aug. 28, 2022
Email, University of California, Merced sociology professor Charlie Eaton, Aug. 30, 2022
DignityAndDebt.org, "An Open Letter To President Biden: Scholars Support Your Promise To Cancel Student Debt," Jan. 28, 2021
PolitiFact, "Fact-checking statistics about Biden's student loan forgiveness plan," Aug. 26, 2022
PolitiFact, "Biden orders $10,000 to $20,000 in student loan debt forgiveness," Aug. 24, 2022
PolitiFact, "Grothman mostly right on who would benefit from student loan debt forgiveness," June 10, 2022
PolitiFact, "On student loan forgiveness, Joe Biden has many options," May 6, 2022
Penn Wharton Budget Model, "The Biden Student Loan Forgiveness Plan: Budgetary Costs And Distributional Impact," Aug. 26, 2022
Email, Kent Smetters, Boettner professor of business economics and public policy at the University of Pennsylvania’s Wharton School and faculty director of the Penn Wharton Budget Model, Aug. 30, 2022
The White House, "Fact Sheet: President Biden Announces Student Loan Relief for Borrowers Who Need It Most," Aug. 24, 2022
Time, "Fact-checking 6 Criticisms of Biden's Student Loan Forgiveness Plan," Aug. 26, 2022
University of Chicago Becker Friedman Institute for Economics, "The Distributional Effects of Student Loan Forgiveness," April 14, 2021
The Federalist, "Studies Show Biden’s Illegal Student Debt Scheme Is Welfare For The Rich," Aug. 24, 2022
Mother Jones, "The Republicans Are Lying Quite Pathetically About Student Debt Forgiveness," Aug. 25, 2022
Federal Reserve, "Survey of Consumer Finances, 1989-2019, Education Installment Loans by Percentile of Net Worth — Percent Holding" Nov. 4, 2021
Federal Reserve, "Survey of Consumer Finances, 1989-2019, Education Installment Loans by Percentile of Net Worth — Mean" Nov. 4, 2021
Census Bureau, "Income and Poverty in the United States: 2020," Sept. 14, 2021
Washington Post, "Biden’s student loan announcement is a regressive, expensive mistake," Aug. 24, 2022
American Enterprise Institute, "The Surprising Role of High-income Families in Student Debt Trends: Examining Undergraduate Borrowing by Income, 1995–96 to 2015–16," Dec. 04, 2019
Email, student debt expert Mark Kantrowitz, Aug. 29, 2022
Email, University of North Carolina associate professor of public policy Fenaba Addo, whose research includes debt and wealth inequality with a focus on family and relationships and higher education, Aug. 30, 2022
Heritage Foundation, "Why Biden’s Student Loan Bailout Is Unfair," Aug 29, 2022
Forbes, "Biden’s Student Loan Forgiveness Plan: Here’s Who Benefits Most—And Least," Aug. 24, 2022
Axios, "Who student debt relief helps, and it's not who you think," Aug. 29, 2022
Federal Reserve Bank of New York, "Who Are the Federal Student Loan Borrowers and Who Benefits from Forgiveness?", April 21, 2022
Roosevelt Institute, "Student debt cancellation is progressive," June 2021
Email, Federal Reserve principal economist Jesse Bricker, household wealth expert, Aug. 30, 2022
Federal Reserve Bulletin, "Changes in U.S. Family Finances from 2016 to 2019: Evidence from the Survey of Consumer Finances," September 2020
Washington Post Fact Checker, "The White House’s tricky comparison between student loan relief and GOP tax cuts," Aug. 30, 2022
FactCheck.org, "Q&A on Biden’s Student Loan Forgiveness," Aug. 30, 2022
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