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Figuring out who benefits most from student loan forgiveness — the poor, the middle class, or the wealthy — might seem like a simple exercise.

But an exact calculation is difficult, according to economists and education experts. Besides the challenges with the available data, the future financial benefits that will accrue to some borrowers are nearly impossible to model, they said.

However, the issue takes on particular importance as the public weighs the merits of President Joe Biden’s Aug. 24 announcement that he would forgive up to $10,000 in federal student debt for most borrowers and up to 20 $000 for a subset of receivables. Relief is also limited to those earning less than $125,000 a year, or married couples or heads of households earning less than $250,000.

In remarks after the announcement, Biden said 95% of borrowers — 43 million people — would benefit from the debt relief plan. Nearly 45% of borrowers, or nearly 20 million people, would see their debt entirely cancelled, he said.

But which borrowers will benefit the most?

White House plan assesses individuals, not households

The White House posted a board breakdown of the distribution of total dollars forgiven by three income groups. It shows that 87% of the money would go to those earning less than $75,000 a year. None would be paid to people earning more than $125,000.

Leveraging that data, Biden said the plan would target poor and middle-class people — “the families who need it most.”

This is true in at least two senses: The policy sets an income cap for forgiveness, ensuring that wealthier households cannot participate. And recipients of Pell Grants, a type of financial assistance for low-income families, are eligible for double the maximum relief, or $20,000, compared to other borrowers.

Biden forgives $10,000 in federal student loan debt for most borrowers

But White House analysis measures income per individual, rather than at the household level. Let’s say that each spouse of a married couple earns $70,000 a year — they would have $140,000 in joint family income, but would be among the group earning less than $75,000 in the White House income analysis.

The Biden administration felt that an analysis of individuals would be more accurate than that of households, because US Department of Education data does not indicate whether a borrower is married, according to a White House official.

“It’s not a gift for the rich”

A few institutions have conducted independent analyzes that measure the overall impact on households. Most believe that low- and middle-income households will receive the bulk of the benefits, but differ on the precise share of these groups in overall forgiveness dollars.

Economists at the Wharton School of the University of Pennsylvania estimate that households with annual incomes below about $82,000 would receive the bulk — 74% — of the total rebate funds. These families are part of the bottom 60% of employees.

According to a separate Penn Wharton analysis for CNBC, people in the bottom half of income would receive about 55% of rebate dollars.

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“This is not a gift for the rich,” said Kent Smetters, professor of business economics and public policy at the University of Pennsylvania.

“A little more relief” comes to the bottom half, largely thanks to the “Pell Grant bonus,” Smetters said.

“But it doesn’t particularly target low-income households as much as other transfer programs,” he added, using the working income tax credit as an example of an existing policy that is better targeted. on poor households.

According to Penn Wharton, about 95% of the total benefits go to households with incomes below $150,000.

A White House official said the Penn Wharton The study supports its basic conclusion that the vast majority of benefits go to low- and middle-income people.

The JPMorgan Chase Institute, in a separate facility study, found that a smaller share (51%) of total debt cancellation would accrue to the poorest 60% of households. JPMorgan defines this group as having an income of less than $76,000 per year.

The middle class could see ‘the biggest increase in effective income’

About two in three of the lowest-income borrowers would see their federal student debt wiped out entirely, according to the JPMorgan study. According to the analysis, black and Hispanic borrowers are more likely to have their debt fully forgiven than white borrowers.

Biden’s policy would give low-income, student-indebted households the “largest proportional reduction in debt payments,” compared to middle- and high-income earners, according to a separate Goldman Sachs report released Aug. 25. Most low-income households don’t have student debt and therefore won’t get any benefit, according to the study.

“We estimate that middle-income households will receive the greatest increase in effective income from the announced debt cancellation plan,” the analysis says.

“There is no perfect data” for the impact of forgiveness

So what do you think of all this? In short: it is difficult to make definitive statements about which income groups will get what share of the benefits.

For one thing, each analysis uses different sets of data that yield different results. Penn Wharton’s estimate, for example, draws on data from the Department of Education and the Federal Reserve’s Consumer Finances Survey. Due to the details of this Fed investigation, while it captures a parent’s student debt, it may not capture the debt of a recent graduate living at home with those parents, according to the economists.

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Meanwhile, JPMorgan’s analysis uses credit bureau and bank data from Chase. The analysis assumes that all borrowers with an income of $125,000 to $250,000 are married, for example; the bank’s data suggests this is true for the “vast majority” of these borrowers, but the assumption skews the distribution of benefits to wealthier households, according to the analysis. Using bank customer data may also exclude some low-income earners, the economists said.

“There are no perfect data, they don’t exist,” said Dominique Baker, associate professor of educational policy at Southern Methodist University. “Even the Department of Education doesn’t have perfect data.”

Consider other quirks like this: the government awards Pell grants to students based on parental income; as long as a borrower’s income is below $125,000, they would qualify for the Pell Grant forgiveness “bonus” based on their parents’ lower incomes in previous years, Smetters said.

According to Matt Bruenig, economic policy analyst and president of the People’s Policy Project, there is also the question of what “income” to consider for an analysis of the benefits of forgiveness.

For example, economists may choose to look at a parent’s current income, a student borrower’s current income, or a student’s expected future income, Bruenig said. These types of data assumptions yield different results.

“We want to do analysis that we can’t even really do,” Bruenig said.

“There’s all this change in people’s financial lives”

According to education experts, there are also a host of financial benefits of loan forgiveness that would accrue primarily to low- and middle-income people, but which cannot be captured in these data analyses.

Contrary to popular belief, borrowers with less debt are more likely to default on their student loans, said Susan Dynarski, professor of education at Harvard University. These are usually low- to middle-income borrowers, she said.

Defaults negatively impact credit scores, which can then negatively impact homeownership, hurt job prospects and increase the costs of other lines of credit, he said. she stated.

“Not all of that is measured” in revenue analytics, Dynarski said. “I think that understates the benefits of forgiveness, especially for small loans.”

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Forgiving these relatively small balances may mean less flow of federal dollars to these borrowers — but forgiving their debts would likely have an outsized impact.

“There’s this whole change in people’s financial lives,” Baker of Southern Methodist University explained.

Many borrowers are in default due to failures in the student loan system itself, such as mistakes among student loan servicers over revenue-driven repayment plans, Dynarski said. Correcting these errors by canceling the debt is probably worth the effort, even if it means that some wealthier households who “don’t need it” also benefit, she explained.

“For people with small loans who are harmed to get out of this system, I agree with a few middle-class people who get forgiveness,” Dynarski said. “I consider it a cost of doing business.”