Should there be an income cap on student loan forgiveness?

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Logan Kolas is an economic policy analyst at the Center for Economic Research at the Buckeye Institute and author of “Policy Solutions for More Innovation: Modernizing Ohio’s Policies to Sixteen New Economic Opportunities.”

The Biden Administration’s Predictions student loan forgiveness policy will play a “reverse Robin Hood” role designed to take from the working poor and give to the more bookish wealthy.

Such misguided wealth transfers are always riddled with dangerous unintended consequences.

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President Joe Biden’s plan is no exception, but it offers Ohio policy makers an opportunity to seek better solutions to a persistent problem.

Risky behavior would be rewarded

Rightly pilloried as a bailout for rich kidsfederal student loan debt forgiveness rewards the risky behavior of those who promised to repay their loans after going to college by taxing workers who have been paying off college debt for years or never borrowed money for school in the first place.

Biden’s proposal attempts to make an unfair idea fairer by forgiving federal loans only to borrowers who have made less than $150,000 Last year. But it still sends all the wrong signals to working taxpayers, colleges, and students.

Student loan forgiveness can only be done at the expense of working taxpayers. And the president’s plan tells workers that their current and future jobs are worth less than bailing out college graduates. The insult only gets worse from there.

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Sends the wrong message to students

The Biden administration’s proposal tells prospective students that they, too, can borrow money they may never have to repay. Such a message encourages reckless borrowing and reinforces the mistaken assumption that one can borrow without worrying the effort required to repay.

Logan Kolas is an economic policy analyst at the Center for Economic Research at the Buckeye Institute and author of

Once again, big government prefers market manipulation to market improvement. In real markets, loans are based on the perceived repayment capacity of the borrower. Interest rates go up and loans go down for riskier borrowers who seem more likely to default.

Anyone applying for a mortgage or car loan learn this. Applied to student loans, market lenders would adjust loan terms based on the likelihood that the borrowing graduate will repay the debt – some degree facilitate this repaymentsome don’t.

The government-manipulated student loan market avoids such distinctions. He offers cheap pots of other taxpayers’ money to all comers, whatever the course of the borrower or the odds that they will afford the principal plus interest. It removes the real market forces that would normally encourage borrowers to pursue skills and degrees that will help them pay their student loans.

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Would not address the cost of college

President Joe Biden waves as he boards Air Force One at Andrews Air Force Base, Md., Thursday, May 19, 2022, to fly to Seoul, Korea, to begin his first trip to Asia in as president.  (AP Photo/Gemunu Amarasinghe)

Forgoing loans without adjusting the underlying systemic issues guarantees the problem —unaffordable higher education – is never repaired. Students and their parents will be more likely to agree to pay whatever colleges ask today in good faith expectation that Uncle Sam pay their tuition tomorrow. And that very important market signal – price – will be muted.

But the one in Washington debt cancellation plan is so bad that it presents Ohio with an opportunity. Instead of another “reverse Robin Hood” wealth transfer, policymakers in Ohio should start fixing the state’s broken higher education funding systems and set an example for Washington.

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Legislators should start by making the education spending market work more like a real market. Public funding for higher education should be based on real market measures such as graduate loan repayment rates, debt-to-income ratios, graduation rates and postgraduate employment figures. ‘Graduation.

Students are graduating with more debt than ever.

Colleges and universities should have to demonstrate that their graduates — not other working taxpayers — will have the financial capacity to repay the cost of their education to receive state funds.

Ohio should send the right signals to its workers, schools and students, not wait for another federal bailout that creates more problems than it solves.

Logan Kolas is an economic policy analyst at the Center for Economic Research at the Buckeye Institute and author of “Policy Solutions for More Innovation: Modernizing Ohio’s Policies to Sixteen New Economic Opportunities.”

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